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Highlights:
- Indian Web3 sector calls for revised crypto tax rates and clearer regulation in the upcoming Union Budget.
- Industry leaders urge the government to align digital asset policies with global trends.
- High taxes and TDS have pushed investments into other countries, hindering domestic innovation.
India's Web3 sector is eagerly awaiting the government's Union Budget announcement, hoping for much-needed reforms to drive the country's blockchain and crypto development. Industry leaders have shared their expectations for policy and taxation changes that could make India more competitive on the global stage, particularly in the rapidly evolving digital asset and emerging technologies sectors.
The Need for Clear Crypto Regulation
Unlike the US and UK, India does not yet have comprehensive regulations in place for the crypto sector. Experts believe the Union Budget presents an ideal opportunity for India to establish itself as a hub for blockchain development, leveraging its large pool of talented developers. According to Sathvik Vishwanath, Co-Founder of Unocoin, India should prioritize investments to enhance its digital infrastructure and promote blockchain research. He also advocates for the introduction of clear policies that regulate sectors such as crypto and Artificial Intelligence (AI), aligning the country’s approach to emerging technologies with global trends.
The US, for example, has established a special Task Force through the Securities and Exchange Commission (SEC) to accelerate crypto-related legislation. Similarly, the UK plans to finalize its own set of rules by the mid-2020s. India, on the other hand, has yet to announce any specific timeline for implementing crypto regulations.
Tax Reforms for Growth
The Indian government has imposed a 30% tax on cryptocurrency earnings, along with a 1% tax deducted at source (TDS) on each crypto transaction, which came into effect in April 2022. Industry players have consistently called for a revision of these tax rates, as the current framework is seen as a barrier to growth in the sector. High tax rates and the TDS law have pushed investments into more crypto-friendly nations like the UAE, leaving India lagging behind in the global Web3 race.
Sonu Jain, Chief Compliance Officer at 9Point Capital, stressed the need for tax rate revisions, including allowances for loss offsets, to foster growth within India’s Web3 sector. These adjustments, if implemented, could attract more domestic and international players, benefiting the entire digital asset ecosystem.
In the previous year's budget, Finance Minister Nirmala Sitharaman abolished angel tax for investors supporting startup ventures, but crypto and blockchain were notably absent from the discussion. Thangapandi Durai, CEO of Koinpark crypto exchange, emphasized that if India focuses on reforming tax policies and bolstering blockchain development, it could significantly enhance the country's standing in the rapidly growing global crypto market.
