India's contribution in the development of Web3, metaverse, and blockchain could increase multi-fold, if more Indians engaged with the digital assets sector, according to PayBito chief Raj Chowdhury. India's current tax regime on the digital assets sector, Chowdhury believes, is restricting the growth potential of the sector in the country. In an appeal to India's finance ministry, the crypto trading company chief has said that the 30 percent tax on crypto profits must be revisited and possibly slashed, now that the nation is just days away from getting its union budget for the fiscal year of 2023-2024.
“Cryptocurrencies have optimised transaction settlements in a way that has been embraced by MNCs, payment processing services, and expatriates sending earnings to their dear ones through remittance. The 30 percent crypto taxation slab has been detrimental to the growth of the crypto eco-system across India, with several exchanges withdrawing or setting up operations in crypto-friendly countries,” Chowdhury said in a statement.
Ashish Singhal, the CEO of Indian crypto exchange CoinSwitch has also said that this year, India's approach towards the crypto sector should be about ‘refinement'.
“India should incentivise users to stay within national jurisdiction by reducing the burden of taxes. The current tax regime and no provision to offset losses is making the markets illiquid, and investor sentiment is running low. Such circumstances push consumers' money offshore into the grey markets, exposing them to regulatory issues,” Singhal told Gadgets 360.
In a subtle nod to the crypto sector, the Indian government announced last year that all profits churned from crypto trading activities will be taxed at 30 percent. In addition, at each step of the transaction, India deducts one percent TDS to maintain a trail of the crypto transactions, which can largely be facilitated anonymously.
Despite outcries from members of the crypto community, the government did not budge on its crypto tax decision.
“If the TDS aims to establish a trail of crypto transactions, it can be achieved by a lower TDS rate of 0.1 percent. Similar to listed securities, existing provisions of capital assets should be made applicable for VDAs. Thirdly, to make India a competitive country in the growing crypto industry, tax authorities should allow carrying forward and setting off losses incurred from the sale of VDAs, similar to how it is done for capital gains,” Singhal noted.
In its recent report, Indian research institution Esya had said that Indians shifted over $3.8 billion (roughly Rs. 30,916 crore) in trading volume from local to foreign crypto exchanges.
The same report had also highlighted those Indian exchanges lost 81 percent of their trading volumes as soon as the crypto taxes went live in India.
“Standardised crypto regulation frameworks can elevate India to the position of a global leader, but the current heavy-handed taxation needs to stop,” the PayBito chief said, urging the Indian finance ministry to expand the space for the crypto industry to thrive in India.