Budget a missed opportunity, say crypto startups

Crypto startups expressed disappointment with Budget 2024, as they had anticipated tax rate cuts on virtual digital assets (VDAs). Union Finance Minister Nirmala Sitharaman made no announcements regarding crypto taxes in the Budget, which the crypto industry views as a missed opportunity to support crypto startups and investors.”We had hoped the government would reduce taxation to align it with other asset classes. Unfortunately, this has not been addressed, representing a missed opportunity to support startups and investors in the crypto space,” said Ashish Singhal, Co-founder of Lemonn and CoinSwitch.

Meanwhile, Vikas Singh, Co-Founder of NFTFN, said, “There was an expectation that the government would align its taxation policy with other asset classes to foster growth and investment. Regrettably, this opportunity was not seized, marking a missed chance to further support startups and investors within the crypto space.”

Currently, crypto investors in India are subject to a 1% tax-deducted-at-source (TDS) on every crypto transaction. Profits from cryptocurrency trading or asset transfers are taxed at 30%. Additionally, stringent rules prevent crypto losses from being set off against any other income, such as salary or business income, nor can they be carried forward to subsequent years. Only the cost of acquisition is deductible.

Sumit Gupta, Co-founder of CoinDCX, highlighted the industry’s ongoing efforts to advocate for a more favorable tax framework: “For investors, we had anticipated some relaxation to the taxation framework in this budget. We will continue to push for rationalizing the taxation framework, which includes reducing the TDS to 0.01%, allowing the setoff of losses on VDA transactions, and modifying the 30% tax on capital gains. We have submitted data-backed analyses on the flight of capital and users and the potential increase in government revenue should the taxation structure be revised. We remain hopeful that the government will consider our requests and implement changes in the future.”

Meanwhile, Edul Patel, CEO and Co-founder of Mudrex, offered a balanced perspective, “Finance Minister Nirmala Sitharaman’s decision to maintain the current tax rates on virtual digital assets (VDAs) has both pros and cons. On one hand, not updating the tax laws might deter new investors and slow the sector’s growth, as the current tax regime could be a barrier to broader adoption and investment. On the other hand, keeping the tax rates stable provides predictability for existing crypto investors, which can help support steady market growth.”

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of the Economic Times)

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