As India gears up for the Interim Union Budget 2024 set to be presented on February 1, the cryptocurrency sector is brimming with expectancy for regulatory reforms.
What Happened: In light of the upcoming budget, there is optimism within the cryptocurrency sector that there will be a review and potential reform of the current taxation policies concerning virtual digital assets (VDAs).
Key industry figures also anticipate that the budget might include provisions for setting up a self-regulatory organization for the cryptocurrency and blockchain industries, as well as introduce initiatives like regulatory sandboxes designed to support and nurture startups in the crypto space.
It should be noted that the introduction of taxes on cryptocurrency transactions resulted in reduced trading activity on local platforms, as a large number of traders moved to international exchanges.
Nonetheless, recent measures taken by the finance ministry, which involved sending formal inquiries to foreign exchanges and restricting access to certain websites, have somewhat alleviated the pressure on India-based cryptocurrency exchanges.
Balaji Srihari, Business Head at CoinSwitch told Benzinga India, “Post FIU-IND notice on December 28, we saw a spike of 30-35% in our transactions,” Srihari said. “The overlap with the crypto market’s buoyancy hints at sustained retail interest.”
Industry advocates eagerly await potential budget inclusions addressing taxation norms for virtual digital assets (VDAs) and refining existing regulatory frameworks.
CoinDCX’s Co-Founder, Sumit Gupta said that “measures such as reducing the TDS and aligning tax rates with other assets could significantly boost the sector,” Gupta emphasizes. He further proposes the inception of a self-regulatory body, citing “Digital India” initiatives.
CoinDCX has proposed an inclusive set of recommendations aimed at fostering a favourable economic condition for the burgeoning VDA industry. Calls to explicitly include offshore platforms within the TDS mandate, the reduction in the TDS rate, and an equitable tax rate reduction, among others, convey a concerted effort to secure a competitive edge for the Indian VDA industry.
"In pursuit of equitable taxation, we propose an amendment to Section 115 BBH to reduce the tax rate from 30%, at par with assets in other industries. Further, we recommend revisiting the threshold limit for tax deduction under Section 194S, suggesting an increase from ₹10,000/ ₹50,000 to ₹5,00,000, in coherence with the provisions in Section 194-O of the Act," Gupta added.
Why It Matters: The Union Budget is thus seen as a beacon of hope to reinvigorate domestic platforms and to catalyze the growth of India’s digital asset landscape.
The establishment of a self-regulatory body is viewed as an underpinning for clarity and expansion of use cases globally, potentially hoisting India to leadership within this space. Moreover, the approval of Bitcoin ETFs in the US has fueled Indian crypto firms’ ambition, provoking a desire for affirming regulatory discussions in India.
Industry executives are hopeful that Finance Minister Nirmala Sitharaman’s budget will be a paramount step into a new era for cryptocurrency in India.
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