Crypto Industry Urges Tax Cut in Budget 2024 to Revive Ailing Sector

The crypto industry in India is facing a major setback and is urging the government to implement tax cuts in Budget 2024 to revive the ailing sector. The introduction of 1% TDS in 2022 resulted in a significant loss in potential government revenue as Indian crypto traders migrated to overseas platforms. In addition, the fallout of global exchanges and global finance uncertainty has negatively impacted the cryptocurrency market. To address these challenges, crypto investors and exchange owners are demanding tax rate cuts and a comprehensive policy on cryptocurrency regulation. However, the government is unlikely to offer any relief and may consider imposing higher restrictions, including a complete ban on private cryptos. The industry seeks clarity in the definition of virtual digital assets and the removal of 1% TDS on overseas crypto assets. Moreover, there is a suggestion to provide tax breaks for blockchain security infrastructure and advanced security protocols to attract investment and create high-skilled jobs. Establishing a well-defined legal framework is crucial to unlock trust and fuel growth in the crypto industry. The industry also recommends lowering the TDS rate from 1% to 0.01% to invigorate the sector. The Interim Budget 2024 is eagerly awaited by the crypto industry in India, as it is hoped that the government will address the challenges faced by the sector.

The introduction of a 1% Tax Deducted at Source (TDS) on crypto transactions in 2022 has resulted in a significant loss of potential government revenue. It is estimated that around $420 million has been lost due to the migration of Indian crypto traders to overseas platforms. This move has not only impacted the government’s coffers but has also had a negative effect on the cryptocurrency market as a whole.

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The fallout from global exchanges and the uncertainty in global finance has further exacerbated the situation. Crypto investors and exchange owners are now demanding tax rate cuts and a comprehensive policy on cryptocurrency regulation. They argue that such measures are necessary to revive the industry and attract much-needed investment.

However, it seems unlikely that the government will offer any relief in terms of tax cuts. In fact, there are concerns that they may impose even higher restrictions, including a complete ban on private cryptocurrencies. This has left the industry in a state of uncertainty and has created a pressing need for clarity in the definition of virtual digital assets (VDAs) and the removal of the 1% TDS on overseas crypto assets.

To boost the industry and create a favorable ecosystem, experts have suggested various measures. These include proposed tax breaks for blockchain security infrastructure and advanced security protocols to attract investment and create high-skilled jobs. Additionally, there have been calls to create special economic zones for Web3 startups and offer tax holidays for innovation and product development.

Establishing a well-defined legal framework is crucial to unlock trust and fuel growth in the crypto industry. This would provide much-needed stability and clarity for investors and businesses operating in the sector. It is also important to lower the TDS rate from 1% to 0.01% and align the tax rate with other assets to invigorate the crypto sector.

The high TDS rate and the lack of offsetting options have led many Indian VDA users to trade on non-compliant foreign exchanges, risking the loss of their investments. These concerns highlight the urgent need for the government to address the challenges faced by the crypto industry in the upcoming Interim Budget 2024.

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There are four key concerns within the existing taxation framework that need attention. These include a clear distinction in tax treatment between long-term and short-term capital gains, a fair and nuanced taxation structure based on individual income brackets, allowing offsetting of crypto losses against gains, and reducing the Tax Deducted at Source (TDS) rate.

India has positioned itself as a global leader in the adoption of cryptocurrencies. However, for the country to maintain this position, it is imperative that the government establishes a regulatory framework that safeguards investor interests and supports the growth of the industry. Addressing these concerns is not just about regulatory compliance, but also about recognizing the evolving nature of finance and embracing a forward-looking approach.

The actions taken by the government in Budget 2024 will have far-reaching implications for the future of the crypto industry in India and the country’s position in the global digital economy. It is crucial that policymakers take into account the concerns of industry stakeholders and work towards creating a favorable environment for growth and innovation in the sector.

Trishla Tyagi
Trishla Tyagi

Trishla is a news writer and social media aficionado. She has substantial experience in covering updates, events, and news related to the different space, along with rapidly expanding blockchain and financial technology markets. Her experience in the cryptocurrency market has led her to become a crypto hodler herself.