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Sustainable Crypto Taxation Path Expectations In Union Budget 2024

Key Takeaways
  • Expect a significant TDS reduction in crypto transactions (1% to 0.01%) in Union Budget 2024, aiming to attract users, enhance oversight, and increase tax revenue.
  • Calls for aligning crypto taxation with equities signal a need for policies allowing loss setoff, encouraging traders and acknowledging similarities with securities trading.
  • Anticipate the budget to classify cryptocurrencies, signaling the need for a flexible yet robust regulatory framework for India's crypto future post-elections.
29-Jan-2024 By: Sudeep Saxena
Sustainable Crypto T

Crypto Taxation Reforms In India's Union Budget 2024

In the dynamic landscape of digital innovation, including AI, VR, and cryptocurrencies, 2024 is poised to be a transformative year. However, India faces a pivotal moment in shaping its crypto taxation strategy. The current tax framework, designed for sector monitoring, raises questions about its alignment with broader economic goals.

Reducing TDS Rates in the Union Budget 2024 for Enhanced Growth

The existing legislation, Section 194S, imposes a 1% tax deduction on crypto transfers, aimed at monitoring transaction flows. However, this high rate has led to a significant shift of transactions to foreign platforms, impacting the Indian crypto market.

A proposed reduction to 0.01% aims to balance transaction tracking needs with sector growth. This move in Union Budget 2024 could attract users back to Indian crypto exchanges, foster government oversight, and potentially boost tax revenue.

Empowering Traders and Allowing Setoff for Losses

The current tax policy prohibiting the setoff or carry-forward of crypto losses requires revision. Aligning crypto taxation with equity shares and derivatives by permitting loss set-off is crucial. The current 30% tax rate, based on its perceived speculative nature, overlooks crypto's similarities to securities trading. Clear ownership, title, and liquidity characterize both, and enabling loss adjustment can encourage risk-taking traders to participate in the crypto market.

Towards Regulatory Clarity

Post the PMLA notification, granting reporting entity status to crypto service providers, effective tracking of crypto transactions aligns with the government's goals. Lowering the TDS rate complements this, fostering sustainable growth.

The Union Budget Expectation is for the government to classify cryptocurrencies as a regulated asset class, similar to securities, with corresponding tax slabs and set-off benefits. A flexible yet robust regulatory framework is anticipated to accommodate industry evolution while safeguarding investors and preventing illegal activities.

Current tax laws seemingly contradict the "Make in India" and "Atmanirbhar Bharat" policies, hindering domestic industry promotion and self-reliance. Utilizing international exchanges raises data privacy concerns and undermines the ease of doing business. Striking a balance between practicality and alignment with policies is crucial for India's crypto future. Currently, Indian Crypto Exchanges are facing challenges; they may get stability if the government is planning in favor of the crypto sector in India.

Pragmatic Stance in Crypto

The government's pragmatic approach to crypto, coupled with a track record of policy realignment based on evidence, instills hope for judicious decision-making. As the nation moves towards a new government post-elections, Coin Gabbar expects clear and consistent regulations that foster the growth of the crypto industry while ensuring national interests.

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