India's Finance Minister Nirmala Sitharaman kept crypto tax rules unchanged in her address announcing the nation's budget for 2024-2025 on Tuesday. The ability to offset losses, high tax of 30% on the gains and 1% TDS on VDA transactions are some of the major industry concerns which were not addressed in the budget.
Dilip Chenoy, Chairperson, Bharat Web3 Association
The nine focus areas of budget 2024 are key steps towards our goal of Viksit ( check spelling) Bharat. The budget also lays out a clear framework for digitisation of various sectors , where Web3 technology could play a critical role.
“We were hoping for some relaxation to the taxation framework on VDAs in this budget, but the absence of any announcement is not particularly disheartening, given the Govt's overall negative stance towards the sector. We have submitted data-backed quantitative analyses regarding the flight of users' trading and transactions, as well as the potential increase in government revenue should the taxation structure be revised,” highlights Dilip.
“We will continue to push for rationalization of the taxation framework, which includes reducing the TDS to 0.01%, allowing setoff of losses on VDA transactions and modifying the 30% tax on capital gains. We are hopeful that the government will consider our requests and that we will see changes in the future,” he adds.
On the positive, abolishing the angel tax for all classes of investors will work towards bolstering the Indian startup ecosystem. Dilip stated that they are looking forward to more Web3 startups setting base in India, given India's immense Web3 talent and potential. Finally, the impetus provided to blockchain skilling and talent development in the Economic Survey can empower youth for the exciting opportunities in Web3 and contribute to a skilled ecosystem for Web3 adoption.
Shivam Thakral, CEO of BuyUcoin, India’s Second-longest running Digital Asset Exchange
Shivan exclaims that they welcome the positive announcements made by the honorable finance minister in today’s budget. However, the demands of the Web3 sector were not met and will continue the constructive dialogue with the regulators to address the industry concerns:
Here is the analysis of the Union Budget 2024:
Angel tax abolished: India’s startup ecosystem received a big boost in today’s budget as the angel tax is abolished for all classes of investors. This move will be a gamechanger for startups planning to raise funds for their expansion as it will give startups more surplus funds to invest in product innovation and technology development to implement their long-term vision for the industry. The move will encourage a lot of innovators to start their entrepreneurial journey and VCs will find it more convenient to invest in early-stage startups. With deep-tech, blockchain and emerging technologies in focus. VCs will be keen to bet on innovative technologies to facilitate the transition from Web2 to Web3.
TDS on VDAs untouched: Web3 as a sector was slightly ignored in the budget as the request to reduce the TDS on VDA transactions was not accommodated in the budget announcement. The delay in reducing the TDS will hamper the industry growth prospects as digital assets will not have a level playing field with other asset classes like stocks, gold and real estate.
Higher tax and not allowed to offset gains: The high tax on gains from VDAs still stands at 30% which is relatively very high and the users are not allowed to offset losses like stocks. This move will prove to be detrimental for the web3 industry as it deprives the industry from a level playing field.
Emerging tech in focus: In an encouraging move, the government highlighted the importance of technologies like blockchain and artificial intelligence. Government is actively involved in leveraging the potential of blockchain and AI for better governance and enhanced delivery of citizen schemes. At the same time, the economic survey also talks about the threats and challenges associated with Artificial Intelligence. The deep-fake incidents that occurred recently calls for a responsible use of emerging technologies through constructive collaboration between government and private players.
