Cryptocurrency markets have called the government’s proposed taxes on digital assets a strong move towards recognizing cryptocurrencies as an emerging asset class. However, not all players are happy with the move, with some noting that the 30 percent slab was too high. Finance Minister Nirmala Sitharaman on Tuesday introduced the taxation of virtual digital assets, which includes cryptocurrencies and Non-Fungible Tokens (NFTs). The government is also introducing a central bank digital currencyor popularly known as CBDC, with blockchain technology in 2022-23.
“The biggest development today was clarity on crypto taxes. This will add much-needed recognition to India’s crypto ecosystem. We also hope that this development will remove any ambiguity for banks and that they will be able to provide financial services to the cryptocurrency industry. Overall, this is good news for us, and we will have to review the detailed version of the budget to understand the finer details,” said Nischal Shetty, founder and CEO of Indian cryptocurrency exchange WazirX.
Sumit Gupta, Co-Founder and CEO of CoinDCX, welcomed the tax move, saying in the statement that it brings “much-needed confidence to the industry,” adding that “taxation of virtual digital assets or cryptocurrencies is a step in the right direction.” ”
“It is encouraging to see that the government has taken a positive step towards regulating digital assets. This will change many misconceptions about crypto assets and pave the way for them to be classified as a separate asset class,” Sahicoin co-founder Melbin Thomas said in a statement.
Investors will have to pay a 30 percent tax on the returns they earn from trading or investing in cryptocurrencies or other digital assets such as NFTs. Any loss from the transfer of virtual digital assets cannot be offset by any other income, according to the announcement. The government has also proposed to provide TDS on payment made in connection with the transfer of virtual digital assets at a rate of 1 percent of such consideration above a monetary threshold. In addition, it is also proposed that any virtual digital asset gift be taxed in the hands of the recipient.
“This is the first step in legitimizing the digital asset market and allowing Indian talent to compete with their global counterparts. Higher taxes may be counterproductive in the long run, but this is only a temporary measure to curb unorganized trading and transfer of cryptocurrencies,” said Anshul Dhir, COO and co-founder of EasyFi network.
But other experts believe that the 30 percent slab will only increase the tax burden for cryptocurrency investors, who will have to shell out a third of their profits in taxes. “This move would force people to move to traditional modes of investment like stocks, mutual funds, because they are not taxed as high as 30 percent,” said Sharat Chandra, a crypto evangelist. indianexpress.com.
Experts also noted that TDS fees can make investing even more complicated for crypto traders. “There are several things here. The 30 percent income tax is still acceptable, but the 1 percent TDS makes it complicated for day traders in India,” Vishwanath, CEO of cryptocurrency exchange Unocoin, told indianexpress.com. Intraday trading refers to the buying and selling of cryptocurrencies on the same day.
Keyur Patel, co-founder and president of GuardianLink and BeyondLife.Club, which is an NFT platform, also expressed his disappointment that NFTs will also be governed by this.
“The government bundles virtual assets into one, which means crypto and NFTs all in the same bucket. Initially, in space it will create a significant hurdle for the investment community, but like all ecosystems, this too will evolve. While we understand that regulation is required to control other elements of crypto, NFTs are nascent in their class and such taxes will need to be adjusted eventually to grow the developing ecosystem. NFTs around the world are still classified as non-taxable assets, and it is imperative that adjustment be taken into account to understand that crypto token is different from digital NFT for future amendments,” he said.
On the adoption of CBDC, experts believe that this move would certainly boost the participation of institutional players in the blockchain space.
“The adoption of CBDC will enhance and make it easier for people to use Polytrade with the supporting infrastructure provided by the government. The development will make digital currencies more accessible to people, just like UPI made digital cash easier to use. We hope that in the near future the government will continue to support and encourage digital currencies,” said Piyush Gupta, CEO of Polytrade on Central Bank Digital Currency CBDC.
CoinDXC’s Gupta also called the introduction of CBDC a “clear signal that India is digital-first, driven by efficiency and transparency.” He added that, “CBDC with the backbone of Blockchain” and help India “gain a powerful position in the global economy.”