Crypto sector urges government to cut tax and clear regulations in budget 2024
The crypto sector in India is eagerly awaiting the Union Budget 2024, which will be presented by Finance Minister Nirmala Sitharaman on February 1. The sector is hoping for some tax relief and regulatory clarity from the government, which has been ambiguous and inconsistent in its stance on cryptocurrencies.
The crypto sector, which comprises investors, traders, exchanges, and startups, has been facing several challenges and uncertainties in the past year. The introduction of 1% TDS (tax deducted at source) on virtual digital asset (VDA) transactions in Budget 2023 has led to an estimated loss of US$420 million in government revenue due to the migration of crypto traders to overseas platforms. The sector has also been dealing with the lack of a clear legal framework and the threat of a possible ban on cryptocurrencies by the government.
The campaign has three main demands:
Flexible tax slabs: The sector wants the government to introduce flexible tax slabs for VDA transactions, based on the holding period and the nature of income. The sector suggests that VDA income should be treated like other capital assets, such as stocks, and taxed accordingly. For instance, long-term capital gains (LTCG) should be taxed at 10%, short-term capital gains (STCG) should be taxed at 15%, and business income should be taxed at 30%.
Reduction of TDS: The sector wants the government to reduce the TDS on VDA transactions from 1% to 0.01%, as the current rate is too high and discourages crypto trading and investment. The sector argues that the reduction of TDS will not only boost the crypto sector but also increase the tax collection for the government, as more traders will use domestic platforms and declare their income.
Allowance of carrying forward losses: The sector wants the government to allow crypto traders and investors to carry forward their losses from VDA sales, like stocks, and offset them against their future gains. The sector claims that this will encourage more participation and innovation in the crypto space, as well as reduce the tax burden for traders and investors.
The crypto sector is also seeking clarity and certainty on the regulatory status of cryptocurrencies in India, as the government has not yet cleared its stance on the issue. The sector hopes that the government will adopt a progressive and balanced approach towards crypto regulation and recognize the potential and benefits of the emerging technology. The sector urges the government to consult and collaborate with industry stakeholders and formulate a comprehensive and coherent policy framework for the crypto sector.
