Budget 2024: Crypto leaders demand tax relief, lauds Govt’s regulatory attempts

Interim Budget 2024: India has claimed the top spot in grassroots cryptocurrency adoption, as per the 2023 Global Crypto Adoption Index from blockchain analytics platform Chainalysis. India is not only home to a thriving crypto investor community but also hundreds of blockchain projects are making strides across the industry, right from our backyard. 

Despite the challenging global regulatory landscape, crypto businesses in the country are building world-class solutions and demanding a conducive taxation regime from the Government ahead of the Interim Budget 2024 which will lead to a favourable ecosystem to innovate. Talking to Republic Business, top voices from the industry shared their opinions, apprehensions, and proposals to the Government. 

Right before the budget, the Bharat Web3 Association shared key grievances of the industry with the government. Industry’s apex body in the document shared with Government and accessed by Republic Business, stated, “We hope that the Government rationalises the taxation framework applicable to VDAs in the upcoming Union Budget 2023-24 by reducing the rate of TDS on the transfer of VDAs to 0.01 per cent from 1 per cent under Section 194S, specifically including foreign exchanges in the scope of TDS under Section 194S; and Reexamining the flat rate of 30 per cent applicable to income from the transfer of VDAs.” 

Sumit Gupta, Co-founder, CoinDCX said, “A strategic focus on significant measures, such as lowering the TDS rate from 1 per cent to 0.01 per cent and aligning the tax rate with the framework applicable to other assets by reducing it from 30 per cent, would undoubtedly invigorate the sector. Additionally, contemplating the establishment of a robust self-regulatory body for crypto and blockchain sector participants could be a game-changer.” 

Nischal Shetty, co-founder of Shardeum, and a leading voice in the crypto space iterated the same sentiment saying, “One of the key limiting factors for the growth of the Indian crypto industry compared to other countries such as the US, EU etc is the high TDS of 1 per cent. We propose a reduction of the TDS to 0.01 per cent which will help compete with the rest of the world and at the same time ensure that digital assets trading operations are done within the Indian jurisdiction.” 

“The industry would also like the ministry to consider rolling out specific domestic regulations for India for greater stability, and dedicate funds for indigenous blockchain projects, exemplifying real-world utility and innovation,” added Shetty. 

Tax relief and better offsetting of losses

Hoping that the Ministry of Finance will reduce the 1 per cent TDS on cryptocurrency transactions, Rajagopal Menon, VP, WazirX said, “TDS rate should be reduced from 1 per cent to 0.01 per cent. Additionally, the offsetting of losses against gains made should be allowed. The underlying objective is to ensure a level playing field in the cryptocurrency space, devoid of regulatory or tax arbitrage for any participant.”

Ashish Singhal, Co-founder and Group CEO, PeepalCo said, “As an FIU-registered platform compliant with India’s KYC and PMLA rules, CoinSwitch urges the Government of India to consider reducing the Tax Deducted at Source (TDS) on VDAs, from 1 per cent to 0.01 per cent, allowing offsetting and carrying forward losses from the sale of VDAs, and treating income from VDAs on par with other capital assets.” 

Edul Patel, CEO of Mudrex, appreciates the Government's commitment to fostering innovation and responsible growth in the crypto industry through its proactive measures. Patel said, “The current imposition of a 1 per cent TDS on every transaction could potentially hinder cryptocurrency adoption. Addressing this concern proactively in the upcoming budget would be a prudent step, aligning with the government's broader objectives in supporting a robust and sustainable crypto ecosystem.” 

Regulatory push to boost retail investments

Vikram Subburaj, CEO of Giottus believes that the Government could further boost its investing culture by bringing crypto as one of the key mediums. However, the current crypto tax regime is restrictive for investors and classifies crypto investing in the same bracket as gambling. 

“On the bright side, steps taken in the last year by the FIU, the government and the Indian crypto platforms indicate that we as a nation, are ready to move forward in this space,” added Subburaj. 

Underlining the same concerns, Kumar Gaurav, Co-Founder of Cashaa said, “A decisive and supportive regulatory framework is pivotal, as it will not only encourage innovation but also attract vital investments to fuel the growth of the crypto sector in India. While our optimism runs high, we remain mindful of the interim nature of this budget, preceding the 2024 general elections.” 

Advocating equal opportunities for Web3 projects, Manhar Garegrat, Country Head, India & Global Partnerships at Liminal Custody Solutions, said, “We urge the government to create equal opportunities for Web3 projects by enabling active participation in government sandboxes. The requirements for inclusion in government sandboxes should be more relaxed to create a more inclusive and encouraging Web3 startup ecosystem.” 

“We also propose offering tax breaks for the development of blockchain security infrastructure and the implementation of advanced security protocols. This incentive will attract investment, generate high-skilled jobs, and solidify India's position as a global leader in secure digital asset custody,” added Garegrat. 

Clear guidelines to build tangible solutions

Shivam Thakral, CEO of  BuyUcoin said, “A well-defined legal framework can unlock trust and fuel growth. This framework should address taxation complexities, establishing clear guidelines for income and transactions, not as barriers but as stepping stones. Exchange licensing protocols should not be shackles but a badge of honour, ensuring responsible participation. Clarity alone isn't enough. Imagine India as a fertile field; crypto and blockchain are the seeds waiting to sprout. We need tax incentives and sandboxes to nurture these seeds into thriving startups.”  

Om Malviya, President, Tezos India said, “The relevant authorities should revisit the taxation around digital assets, especially the TDS on transactions. The exemption limit on short-term capital gain tax should be relaxed to make digital assets more user-friendly.” 

“Sandbox projects and government collaboration will nurture trust and bridge the theory-practice gap, transforming ideas into tangible solutions. Embracing blockchain is not just an economic decision; it's a chance to empower millions with unprecedented transparency, efficiency, and security,” added Malviya.