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Union Budget 2023 India Expectation Highlights: Finance Minister Nirmala Sitaraman will be presenting the Union Budget 2023 on February 1. Last year when the budget came, probably no one expected a hefty tax of 30% on all income from cryptocurrencies. Last year, the Finance Minister further declared that losses from one cryptocurrency asset cannot be compensated by gains from another cryptocurrency asset. A high TDS rate of 1% was also imposed and was applicable from July. A study showed that over 32,000 crore worth of crypto trading had shifted to foreign exchanges from domestic ones between July to October 2022, probably as a result of high TDS. The crypto community is expecting reforms in these areas by the FM. The taxation on VDAs is also expected to get some clarity.
Union Budgets 2023 Expectation Highlights
Further Clarifications Is Expected By Crypto Community
It’s noteworthy to note that expenditures incurred by the miner for cryptocurrency mining, such as electricity costs, costs of high-tech equipment, etc., may not be treated as the “cost of acquisition” of cryptocurrency and as a result, the miner may not be permitted a deduction for those costs. Appropriate clarifications of such matters are advised, said Umesh Gala, partner, at Dhruva Advisors to Outlook India. The crypto community is awaiting clarifications regarding aspects like NFTs and crypto mining.
Already Existing Rules On Crypto
According to the Information Technology Act of 2000, all virtual asset service providers, virtual asset exchange providers, and custodian wallet providers are required to keep all information acquired through “Know Your Customer” (KYC) procedures and records of financial transactions for a minimum of five years.
In February 2022, the Advertising Standards Council of India published its guidelines for the marketing of virtual currencies. Among other features, these guidelines required the use of a prescribed disclaimer and forbade the depiction of minors as well as the use of the terms “currencies,” “securities,” “Custodian,” and “Deposits.”
Experts Take On TDS
The concept of government was fairly straightforward. They were interested in learning the volume of cryptocurrency transactions because they believed that many people were not reporting them on their tax returns. For this reason, they imposed a 1% TDS on the vendor. Since the rule went into effect on July 1, the majority of Indian exchanges have done so; but, since international exchanges are not subject to Indian law, they have not. We must keep in mind that cryptocurrency is genuinely international, according to Rajgopal Menon, VP, of WazirX.
The CBDC Pilot Project
On December 1st, 2022, the digital rupee was introduced. Four major banks are currently participating in the pilot in the cities of Mumbai, Bangalore, Bhubaneshwar, and New Delhi. The purpose of the pilot is to evaluate how well the eRupee was developed, used in real-time, and distributed. In the future, further features will be added, as promised by the RBI.
The second phase of the pilot will also include the addition of other banks and additional cities. The RBI had previously maintained that because the currency is digital, transactions will be simpler, quicker, and less expensive. The eRupee pilot project is going quite successfully as per the RBI.
Crypto Expert Talks About 0.01% TDS
The government should consider at least some reduction in the 1% TDS rate. “When the TDS mandate was announced, we acknowledged and appreciated the government’s effort to track and monitor VDA transactions,” said Sumit Gupta, Co-Founder & CEO, of CoinDCX.
He also talked about their suggestion to the government as they are a partner and collaborator with the government in their effort to understand and monitor the VDA ecosystem.
“Notably, through our representation for the upcoming Union Budget 2023 – 2024, we have suggested that the rate of TDS be brought down to 0.01%. This lower rate will help Indian VDA businesses offer competitive prices to Indian VDA users and protect them from exposure to unregulated foreign exchanges,” he added.
Will The TDS Be Reduced?
We anticipate that the government will introduce further laws for cryptocurrencies after launching the e-rupee. According to estimates, India has almost twice as many cryptocurrency owners as the rest of the world combined. Given this, it is more likely that the government will impose a regressive tax on cryptocurrencies: Cashaa’s founder and CEO, Kumar Gaurav, said to Zee News
RBI Governor Called For Crypto Ban
If private cryptocurrencies are allowed to proliferate, they will be the root of the next financial crisis, the governor of India’s central bank said in December 2022.
Shaktikanta Das, governor of the Reserve Bank of India, stated at a gathering that cryptocurrencies carry significant inherent hazards for our financial and macroeconomic stability. He used the most recent demise of FTX as an illustration.
Das called cryptocurrencies “speculative” and added that he believes they should be outlawed, saying his major worry is that they have no intrinsic worth.
Skepticism Surrounding Crypto
Raghuram Rajan, a former governor of the Reserve Bank of India (RBI), stated that the decline in the value of digital assets over the previous year will enable investors to concentrate on the “true value” of this technology, the distributed ledger, and the smart contracts that can be constructed on them.
The notion that while fiat currencies fail, cryptocurrencies would somehow keep their worth. Rajan told Reuters that was rubbish as he was leaving the World Economic Forum in Davos.
According to the economist, fiat currencies have prevailed in terms of credibility.
The former governor of the RBI had already forewarned investors about the short lifespan of cryptocurrencies. Rajan has forewarned that just a small portion of the 6,000 or so cryptocurrencies in existence will survive.
The Tax Reforms Being Expected From Budget 2023
While talking to us about the tax reforms that the crypto community expects, Punit Agarwal, Founder of KoinX said,
“2022 has been a rather interesting year for the crypto industry and the global economic sector in general. But 2023 seems promising for web 3, crypto, and Blockchain startups.
The major focus of the upcoming budget seems on preserving the financial integrity of crypto traders and investors. The government is focusing more on preventing illegal activities related to VDAs, which suggests that the upcoming budget won’t really give enough relaxation to the current crypto taxes.
The upcoming budget is also expected to give us more clarification on the classification and taxation of VDAs. We might also see more use cases and deployments for crypto in the Indian financial ecosystem, especially with the introduction of the Digital Rupee.”
Crypto Expert Comments On Reducing TDS
While speaking to the Economic Times about the heavy tax on crypto and the shift to foreign exchanges, Avinash Shekhar, the founder and CEO of TaxNodes said,
“We expect the government to reconsider the current putative tax structure [for crypto] and bring it at par with other normal business activities. This will bring more transparency by enabling Indian crypto traders to trade on Indian exchanges rather than going to Peer to Peer and foreign exchanges. This will also encourage innovators and entrepreneurs to build this most innovative technology of our times, from India rather than from outside India.”
