Cryptocurrencies: Big Expectations: What Indian Crypto Industry Wants in Budget 2023

The crypto industry has high hopes for the 2023 federal budget. The industry hopes FM Nirmala Sitraman will bring many changes. Specifically, how virtual digital assets (VDAs) are classified and taxed. The two main requests are:

1. The 1% withholding tax (TDS) on crypto asset sale transactions should be abolished. This tax causes investors to lose capital on every transaction and discourages future investors from participating in this market, leading to loss of capital investment in crypto assets.

2. Similar to equities/derivatives, the current tax regime needs to be changed to allow offsetting and carry forward of losses in VDA. The 30% threshold was set according to the comparison of digital assets with highly speculative instruments such as gambling and betting. However, VDAs are similar to securities transactions and should be treated similarly with respect to taxation and offsetting gains.

A 30% tax and 1% TDS will allow $320 billion to flow from Indian crypto exchanges to foreign crypto exchanges between February and October 2022, according to Delhi-based think tank The Esya Centre. Cumulative transaction volume in rupees has been transferred. The tax regime could wipe out approximately Rs 99.3 trillion of local exchange trading volume over the next four years.

Additionally, using international exchanges raises data privacy concerns. This is because user data is stored overseas and there are fewer avenues available for users in India. The government also opposes current policies that seek to reduce potential tax revenue and improve ease of doing business.

Optimizing these taxes will level the playing field for Indian exchanges and align them with the policies of the Atmanirbhar Bharat and Make in India governments.

India will hold the G20 presidency for the first time and will continue to helm this influential group for a year. The G20 provides a unique platform for the world’s leading developed and emerging economies to participate. The world has taken notice of India’s approach as it successfully weathered the global pandemic and the recent Ukraine crisis. Prime Ministers Modi and Sitarman have repeatedly stated that crypto regulation must be a global effort. The G20 presidency gives India a unique opportunity to set the agenda on global crypto regulation as what has been adopted by the G20 countries sets the tone for the rest of the world to follow.