A budget was presented by the Finance Minister that was not only progressive but also revolutionary. It highlights the focus of India on digital transformation and the promotion of blockchain technology. This budget has touched on main points that will aid the industry in creating strong and supportive growth. Many countries are putting a ban on cryptocurrency while few are including it in their economies. The proposed tax on digital assets makes it clear that it will include NFTs and cryptocurrencies. A tax of 30 % is quite hefty.
The introduction of a CBDC that is central bank digital currency is considered to be a huge move. It sends a strong message that India is eager to have become a country that is lead digitally, efficiently, and maintains transparency.
Cryptocurrency taxation is a step in the correct direction. It will provide much-required clarity apart from confidence in the industry. Although it may be a case of moving two steps forwards and taking a step back.
Impact of taxation on digital asset
- Taxation adds legality to the industry, but such a high rate of tax is discouraging.
- As per the finance minister, the income from any transaction related to cryptocurrency will get taxed at 30 % in accordance with all tax on profits from various speculative activities like gambling, lotteries, etc.
- Cryptocurrency is known to be a digital asset and also a product of investment.
- Trading it needs certain skills and can never be compared with gambling.
- The rate of tax should have been at least similar to that of other asset classes.
- This proposed tax of 30 % on cryptocurrency may be hampering broader adoption of it.
- While the profits from cryptocurrency trading will have a 30 % taxing, losses can never be set against another loss or carried forward.
- Similar to other assets, this industry too experiences a bull run apart from bear markets.
- Any trader may be losing his money in the bear market and have a hope of recovering it at the time of a bull run.
- If they can carry forward the losses it will decrease the burden of tax on the investors.
- Investors are allowed by the government to carry their losses forward and so trading in cryptocurrency must have been provided similar treatment.
- To make the filing of income tax return compulsory, if any individual has tax liability from their cryptocurrency income they need to file a tax return regardless of their yearly income is below INR 5 lakh.
- It will cause unnecessary work not only for assesses but also from the tax department.
- There must be some further clarity on how TDS will be applied and deducted in cryptocurrency-to-cryptocurrency trade.
- The budget is hugely positive for the cryptocurrency industry.
- It must be remembered that it is just the start of the wider process of mass acceptance.
- Various discussions are required to arrive at better processes or systems.
- It is hoped that the perfect actions will be adopted to assist India to chalk out a growth strategy that is digital-led in order to be a $ 5 trillion economy within 2025.
Conclusion
India has more users of crypto compared to other countries worldwide. This is not surprising considering the huge population of the country. But the crypto adopter’s percentage is surprising. India is fifth worldwide with 7.3% behind Russia and Ukraine. It is huge news. Not sure if it will hurt or aid the adoption of crypto in India. Regulators are staring at two revenues. One of them is imposing an outright ban on cryptocurrency and another is making it taxable and incorporating crypto in the country’s economic system. When taxation was declared in India, many thought that a tax of 30% along with a CBDC may be negative news for this market. However, the market jumped upon this as this was considered to be a pivot. India initially talked regarding banning cryptocurrency. Investors are saying that regulation is a good thing because any regulatory ban may be avoided now and the government is interested to integrate cryptocurrency in the country’s economy instead of over-regulating or regulating out. It will also be interesting to see a few countries looking at India’s taxation on crypto as some differentiator for them too. They may be seeing it as a way of boosting their economy in a digital perception. For more information, you need to visit https://bitcoin-profit.cloud/
