The Union Budget for 2023 will be presented on 1 February 2023. Announcements around infrastructure development and tax benefits are expected by many. Every industry is looking forward to this as the upcoming budget will have to lay the roadmap for India’s growth momentum at a time when most of the world is staring at a recession.
The Crypto industry is eagerly looking forward to this Budget as clarity on a few fronts is expected and needed. While it is difficult to predict exactly what the Indian Union Budget for 2023 will include regarding the Crypto industry, it is likely that the Indian Government will continue to closely monitor the Crypto market and take steps to regulate it, as it has done in the past. This could include measures to prevent money laundering and illegal activities, as well as efforts to promote the growth of the blockchain technology underlying Cryptos.
Last year, a 30% tax and 1 % TDS on Crypto transactions were announced during the Budget. While this was a great start to being recognized, certain provisions hit the Crypto community hard. The heavy taxation policy jolted millions of crypto investors in India, which led to many fleeing away to foreign exchanges. This not only affected the Crypto exchanges in India, which are striving hard to promote the ‘Made in India’ idea of our PM but also resulted in a heavy loss of revenue for the Government itself.
The Crypto industry has great potential, and it can definitely boost the national economy. However, for this to happen, certain rationalized approaches are required. As a community, Crypto enthusiasts have some expectations from this upcoming Budget. Here are a few:
- Modify TDS provisions: From 1 July 2022, a 1% tax had to be deducted at source for every Crypto transaction. The reason for introducing this and the provisions are clear and understandable. However, the 1% rate of TDS is definitely a big blow. Yes, while the TDS amount can be utilized as credit while filing the Income Tax Returns, or a refund could also be expected, a large portion of the working capital of traders is blocked for a whole year because of this. A simple reduction of the TDS rate to 0.1% will serve the purpose of the provisions as well as not affect the traders negatively. (PS: Let’s manifest that the typo last year becomes a reality this year!)
- Reduction of Tax rate: For FY 2022-23, Crypto traders have to pay a 30% tax on their Crypto gains with no exemptions or concessions. This is the highest tax slab and adversely affects the traders’ tax planning. A reduction in the tax rate, which is at par with that of other investment avenues, will reduce the burden on the traders’ pockets and will definitely boost the market positively!
- Amend rules for set-off and carry-forward of losses: As of today, while Crypto gains are taxed at the highest rate, losses cannot be the set-off against any gains, nor can they be taken forward to the next financial year. No one can deny that this provision is harsh on any taxpayer. Crypto traders should be allowed the basic set-off and carry-forward benefits. With this, Crypto traders can leverage all the avenues of Crypto trading freely.
- Recognize Crypto as an asset class: The Government has kept Crypto gains at par with the gain from activities like gambling and the like. We all know that the public as a whole considers Crypto as an investment tool. When this is the case, it needs to be treated at par with other investment tools like securities and bonds. With this uniformity, not only will the tax rates be the same, but the ambiguity around calculations, disclosures, and treatment will be removed. Classifying Crypto as an ‘Asset’ would make things transparent, clearer, and more straightforward.
- Encourage innovation and growth: Blockchain, the underlying technology of Crypto, can do wonders. Not many are aware that various state Governments themselves are using the Blockchain technology in administration. As the Government already has first-hand experience with this technology, the industry hopes that this Budget will encourage innovation and growth in the Blockchain and Crypto space by providing incentives to start-ups and companies working in this area. Also, a regulatory sandbox for the crypto and blockchain space in India could be helpful for start-ups to test and innovate.
- Announcement of Crypto Bill: A regulatory framework is a must for any Industry. While several Crypto exchanges in India are working cautiously to ensure there is no miss and user security is maintained, a defined rule book in black and white is a must now to ensure that there are no further fiascos like the FTX and LUNA ones.
We all know that the Crypto industry in India is still in a nascent stage, and the Government’s approach towards Crypto during this Budget will be crucial in shaping the industry’s future growth and developments. The industry is hoping to see the Government adopt a more positive stance towards Crypto and take steps to promote it in India.
What do you think will be the outcome of this Budget? Do let us know in the comments below.
Stay tuned for further updates.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.