The Union Budget mandating – 30% capital gains tax, 1% tax deductible at source (TDS), and the inability to offset or even carry forward losses puts Crypto industry in a precarious situation. Moving from a 10-year imprisonment and a Rs 25 crore penatly in the 2018 Bill to a regular tax system is a huge relief. So, while this acknowledgment is a positive development in general, the way the taxes have been proposed suggests that the government has rushed into this decision. This may result in the loss of new prospects and industry participants in this arena, which global tech leaders are pursuing vigorously.
Any tax policy must be reasonable to the country's citizens and encourage them to report their assets accurately. Given the small number of taxpayers and the availability of good tax advisors, a flat rate of 30% may encourage people to find ways to circumvent these onerous tax regulations. Because, most investors in the market have holdings of upto Rs 1 lakh, a tax rate of 10-15% would have been preferable. An easy fix would have been to employ the existing tax slabs based on income levels.
However, not all of the measures in the Union Budget will be implemented by April 1, 2022. Some will commence on July 1, 2022, while others from April 2023. Another key fact is that cost of acquisition have not been included for existing crypto miners or future business opportunities, such as 'Nodes as a Service,' which is a huge potential market for the industry. This is a significant omission because India is regarded as a global IT hub due to its vast talent pool and infrastructure. It has the potential to become a "multi-billion dollar" market. We are at a crossroads that could result in a significant loss of opportunity, potentially changing the prospects of its people and the economy. Such tough standards and disparities are a clear negative signal for global corporations and crypto exchanges.
According to new regulation, What's disappointing is that although start-ups are initially exempt from paying taxes. However, cryptocurrencies based start ups, which will be at the forefront of the Web 3.0 ecosystem, will be heavily taxed. To be honest, discouraging young entrepreneurs isn't going to propel India to new heights. It would encourage them to migrate to friendlier regime, boosting their economy.
India is a potential market for crypto sector because of its vast population. However, compliance with the Goods and Services Tax (GST), TDS compliance, and a high tax rate may make it appear difficult for international entities and exchanges to invest in India.Around 10,000 young Indians are currently employed by Indian exchanges and crypto-focused enterprises. Furthermore, Indian programmers and developer are being offered a plethora of opportunities from all over the world.
Hopefully, New legislation will consider all of these factors into account and provide sufficient room to the industry for its growth and development . Now is the time to act and, It is crucial that we board the bus before its too late.
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