'India's Crypto Tax A Setback For Digital Assets Growth': Wazir X Founder
Nischal Shetty, founder of Indian cryptocurrency exchange WazirX, believes that the cryptocurrency tax passed in Finance Bill 2022 of India could lead to lower industry participation in the sector and prove to be a setback for the growth of the digital assets ecosystem in the country that is already lagging behind.
The lower house of Indian parliament passed the Finance Bill 2022 on March 25, which levies a 30% tax on virtual digital assets effective April 1. This means that any income from the transfer of cryptocurrencies will be taxed.
The amended bill proposed that any losses from the transfer of virtual assets will not be allowed to be set off against the income arising from the transfer of another virtual asset.
"The crypto-asset day-traders who do not even fall in the income tax slabs would also be unable to save taxes, making them reconsider trading or investing in this space. Moreover, the additional blow bars investors from counterbalancing their losses from one crypto trading pair with gains from another type," Shetty told International Business Times in an exclusive interview.
"Not only would this be considered a significant detrimental factor for crypto trading and investment adoption in India, but it would also become a setback for the growth of the crypto ecosystem in India."
The WazirX founder believes that trading in crypto assets should be treated like any other asset available to investors and set the taxes accordingly.
"At present, the taxes are at a rate that compares to activities like horse racing, monetary-based online gaming etc. These activities are far from what trading in crypto is, so we need to treat it at the same level as stock investments and keep the tax range at more reasonable levels," he said.
The bill also proposed a 1% Tax Deductible at Source (TDS) on payments towards virtual currencies over Rs 10,000 in a year and taxation of such gifts in the hands of the recipient.
Shetty proposed to bring down the TDS from 1% to 0.1% as it would act as an incentive to encourage an inflow into the sector, create better liquidity, and free up their capital bandwidth.
He said that crypto assets regulation, including taxation, would be a prerequisite for the industry to flourish, but the current bill lays down parameters that could reduce participation and increase inefficiencies.
"The Indian exchanges are KYC (Know your customer)-compliant and ensure that the transactions are secure, guaranteeing that the traders are protected against any security threat. However, due to current taxation laws, there is a possibility for them to shift their capital to unregulated or decentralized P2P or foreign exchanges," Shetty said.
"This could become a challenge not only for the exchanges but also for the government to get revenue from taxes. But the larger implication will be the disadvantage to the Web3 space where it will intercept innovation and job creation as entrepreneurs will move to countries with more friendly policies and taxes towards crypto," he added.
Other industry leaders had also voiced similar concerns. Shivam Thakral, CEO of BuyUcoin, said that implementing a single tax for a single crypto rule will be a “massive blow” to the crypto industry in the country.
“If an investor buys Bitcoin in April and sells it at a loss and an investor again buys a Bitcoin in July and sells it at a profit within the same financial year, how will that scenario play out? That’s the reason we have urged the regulators to take a nuanced approach towards crypto and discuss it with the industry stakeholders before arriving at a final decision,” Thakral told International Business Times in March.
Meanwhile, Charles Tan, Head of Marketing at CoinStore, found the move to be a good one that will open the doors for regulations.
“India is a tech powerhouse and it has the potential to lead the world in the crypto/blockchain revolution. Some may feel that the tax structure is on the heavy side but it may undergo adjustments to match global expectations as the crypto industry in India enters a more mature phase. We are hopeful that Indian regulators will reach a consensus with the crypto industry soon,” Tan told International Business Times.
Photo: Nischal Shetty