On February 1, 2023, the Union Budget for 2023 will be unveiled. Many people anticipate hearing about announcements about tax incentives and infrastructure development. Since the 2019 budget will need to build the foundation for India’s growth momentum at a time when the majority of the world is facing a recession, every industry is anticipating this.
Since there is a need for and expectation of clarity on a few fronts, the cryptocurrency industry is eagerly anticipating this budget. The Indian Government is likely to continue closely monitoring the cryptocurrency market and taking action to regulate it, as it has in the past, even though it is difficult to forecast exactly what the Indian Union Budget for 2023 would include addressing the business. This may involve taking action to thwart illicit activity and money laundering, as well as promoting the development of the blockchain technology that powers Cryptos.
During the budget last year, a 30% tax and 1% TDS on cryptocurrency transactions were announced. Although this was a solid beginning, some provisions were particularly harsh on the crypto community. Millions of Indian cryptocurrency investors were shaken by the country’s strict taxation regulations, and many of them fled to overseas exchanges as a result. The government itself suffered a significant loss of revenue as a result of this, in addition to the crypto exchanges in India that are working hard to promote the PM’s “Made in India” initiative.
The cryptocurrency market has enormous potential and can undoubtedly strengthen the economy of the country. Certain logical methods must be used, though, for this to occur. The community of cryptocurrency aficionados has some hopes for the 2018 budget. Here are a couple:
- Modify TDS provisions : Every Crypto transaction must have a 1% tax deducted at the source as of July 1, 2022. The purpose for introducing this as well as the rules are obvious and understandable. The 1% rate of TDS is unquestionably a big blow, though. Yes, even while the TDS amount can be used as a credit when submitting income tax returns or a refund may be anticipated, a significant portion of traders’ operating capital is frozen as a result for an entire year. The provisions will be fulfilled by a straightforward decrease in the TDS rate to 0.1%, which won’t have a detrimental impact on the traders. (PS: Let’s make it so the typo from last year actually happens this year!)
- Tax Rate Reduction : The tax rate for cryptocurrency trading in FY 2022–23 is 30%, with no exceptions or breaks. The tax planning of the traders is negatively impacted by this, the highest tax slab. A tax rate reduction that is comparable to other investment options will ease the financial burden on traders and unquestionably have a beneficial impact on the market.
- Change the policies governing offset and loss carryover : While cryptocurrency gains are now taxed at the highest rate, losses cannot currently be offset against gains or carried forward to a future fiscal year. There is no denying that this clause is onerous for all taxpayers. The fundamental set-off and carry-forward benefits need to be available to cryptocurrency trading. This allows cryptocurrency traders to freely leverage all of their available trading options.
- Recognize Bitcoin as a class of assets : The government has maintained cryptocurrency gains at a level with profits from similar industries, such as gambling. We are all aware that the general public views cryptocurrency as a tool for investing. When this is the case, it must be treated equally with other financial instruments like bonds and securities. Along with the tax rates being the same, this uniformity will also clear up any confusion regarding calculations, disclosures, and treatment. Making Crypto a “Asset” would make everything more transparent, understandable, and simple.
- Encourage growth and innovation: Crypto’s underlying technology, blockchain, is incredibly powerful. Few people are aware that several state governments are utilising Blockchain technology for administrative purposes. The sector anticipates that this Budget would promote innovation and growth in the blockchain and cryptocurrency arena by offering incentives to start-ups and businesses engaged in this field because the government has first-hand experience with this technology. Additionally, a regulatory sandbox for the cryptocurrency and blockchain industries in India would be beneficial for start-ups to experiment in.
- Announcement of the Cryptocurrency Bill: Any industry must have a regulatory framework. A well defined rule book in black and white is now required to ensure that there are no more failures like the FTX and LUNA ones, even if various Crypto exchanges in India are working cautiously to ensure there is no error and user security is protected.
We are all aware that the Indian cryptocurrency market is still in its infancy, and the direction the government takes with this year’s budget will have a significant impact on how the market develops and grows in the future. The business expects the government to take a more favourable position toward cryptocurrency and act to advance it in India.
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