Updated: February 2, 2022 11:46:20 am
Cryptocurrency marketplaces have called the government’s proposed taxation for digital assets as a strong move towards recognising cryptocurrency as an emerging asset class. However, not all players are happy with the move with some noting that the 30 per cent slab was too high. Finance Minister Nirmala Sitharaman on Tuesday introduced taxation of virtual digital assets, which includes cryptocurrencies and Non-Fungible Tokens (NFTs). The government is also introducing a central bank digital currency, or popularly known as CBDCs, powered by blockchain technology in 2022-23.
“The biggest development today was a clarity on crypto taxation. This will add the much needed recognition to the crypto ecosystem of India. We also hope to this development removes any ambiguity for banks, and they can provide financial services to the crypto industry. Overall, it’s a good news for us, and we will need to go through the detailed version of the budget to understand the finer details, ” Nischal Shetty, Founder and CEO of Indian cryptocurrency exchange WazirX said.
Welcoming the taxation move, Sumit Gupta, co-founder and CEO of CoinDCX said in the statement that this brings “much-needed confidence to the industry,” adding that “taxation of virtual digital assets or crypto 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 a lot of misconceptions around crypto assets and pave the way forward to classifying them as a separate asset class,” Melbin Thomas Co-founder of Sahicoin, also noted in a statement.
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Investors will have to pay up 30 per cent tax on the returns they make from trading or investing in cryptocurrencies or other digital assets such as NFTs. Any losses from transfer of virtual digital asset cannot be set off against any other income, according to the announcement. The government has also proposed to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Further, any gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
“This is first step towards legitmising digital asset market and allowing Indian talent to compete with global counterparts. Higher taxation can be counter productive in long run but this is only a temporary measure to contain unorganised trade and transfer of cryptocurrency,” said Anshul Dhir, COO and co-founder of EasyFi network.
But other experts believe that 30 per cent slab is only going to increase the tax burden for cryptocurrency investors, who will have to shell out a third of their returns towards taxes. “This move would force people to move to traditional modes of investment such as stock, mutual funds, because they are not subject to as high as 30 per cent tax,” Sharat Chandra, a crypto evangelist told indianexpress.com.
Experts also pointed out that TDS rates that can make investment even trickier for crypto traders. “There are multiple things here. Income tax at 30 per cent is still acceptable but 1 per cent TDS makes it tricky for intra -day traders in India,” Vishwanath, CEO of Unocoin cryptocurrency exchange told indianexpress.com. Intra-day trading refers to buying and selling of cryptocurrency on the same day.
Keyur Patel, Co-Founder and Chairman of GuardianLink and BeyondLife.Club which is an NFT platform, also expressed disappointment given NFTs will also be governed by this.
“Virtual assets are lumped into one by government implies crypto and NFTs all under same bucket. Initially in the space it will create major roadblock for the investor community but like all ecosystems, this too shall evolve. While we understand regulation to control other elements of crypto are required, NFTs are nascent in its classes and such taxation will have to eventually adjust to grow the developing ecosystem. Worldwide NFTs are still classified as non taxable assets, and it is imperative that the adjustment in understanding that crypto token is different than digital NFT is taken into consideration for future amendments,” he said.
On the adoption of CBDC, experts believe that this move would certainly give an impetus to the participation of institutional players in the blockchain space.
“The adoption of CBDC will improve and make it easier for people to use Polytrade with the supporting infra provided by the govt. The development will make digital currencies more accessible to the people just as UPI made digital cash easier to use. We expect that in near future the government will continue to support and encourage digital currencies,” Piyush Gupta, CEO, Polytrade on Central Bank Digital Currency CBDC said.
CoinDXC’s Gupta also called the introduction of CBDC as a “clear signal of India being a digital-first, efficiency-driven, and transparency-led system.” He added that, “CBDC with the backbone of Blockchain” and help India “gain a powerful position in the global economy.”
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