By Mohammed Roshan
The narrative of virtual digital assets (VDAs) has policymakers, investors and the public alike worried due to the lack of clarity around regulations of these assets.
The tax treatment of VDAs in India — a flat 30 percent tax on gains from VDA trade applicable from April 1, 2022; and a 1 percent tax deducted at source (TDS) on transactions above Rs 10,000 from July 1, 2022 — is indeed worrisome when compared to how crypto is taxed in other nations. This alarm is only heightened by the market volatility surrounding the closure of global VDA platforms.
Despite the many concerns and deterrents, young Indians still view crypto as a potential investment class. Unfortunately, the Union Budget delivered last week gave the VDAs a miss and the tax structures imposed in the previous Budget remain in effect — this includes the provision disallowing the offsetting of losses. Notably, India stands out from the rest of the world by being the only country that imposes highest TDS on VDA transactions.
Lack Of Regulations
When it comes to investments in digital assets, a lack of crypto regulations could prove detrimental. This would mean that Indian traders would be unable to invest in crypto without having to worry about legal issues or even worse, being penalized with heavy fines.
Last year, Indian traders began to flock to foreign exchanges. This could magnify further if crypto regulations are not put in place soon by the government.
Without clear crypto regulations, public companies and firms in India will lack solidarity when it comes to investing in digital assets. Without the benefit of regulations, these companies will be apprehensive about engaging in any business involving digital assets and may be less likely to invest in the crypto space.
It is thus evident that there is an urgent need for clear regulations on crypto investments in India. Such regulations could help to ensure the growth and sustainability of crypto investment in the country, thereby laying the foundation for a brighter future.
Churning Same Old Wine
One could also say that it was expected that this budget session would not contain anything related to the crypto industry. Nevertheless, the crypto industry expects the government to shift its tone and provide a more positive outlook regarding taxation once there is a global consensus on regulations in this sector and the market is able to regain its all-time highs. Without that, crypto or anything related to digital assets would unlikely to be a point of discussion during a budget session.
This non-committal stance of the government means loss of business to Indian Crypto exchanges, which will directly affect the adoption of Bitcoin in the country, and also a missed opportunity for wealth building through investments into crypto related companies.
Rise in Scams
When we consider the implications of this decision, it means that investments into crypto companies would also slow down, leaving existing crypto companies with limited resources and opportunities for growth. In such a situation, the lack of regulations can lead to the potential for scams and leave consumers unprotected.
Crypto can contribute significantly to India’s ambitious goal of a 5 trillion dollar GDP by 2025 and the government should be cognizant of this fact. India has a very good opportunity to be a leader in the space and craft positive, forward-thinking regulations, and this would mean lots of potential revenue to the state.
Speak Up, Before It’s Too Late
The government needs to understand and take into consideration the interests of investors and the potential revenue to be generated and not continue to remain silent. Failing to do so, may hurt the crypto ecosystem in the country, wherein India would be losing out on one of the greatest opportunities for revenue and GDP growth.
It is important for the government to pay close attention and not let this precious opportunity slip away. It’s time for deliberation and thought to go into the law-making process and ensure that the country benefits from the potential wealth that the crypto space provides.
The author is co-founder and CEO, GoSats
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