Indian Budget 2023 on Cryptocurrency: How much tax do you need to pay?
Crypto aficionados were eyeing the new Union Budget 2023 with deep interest. Everyone was wondering if GOI modifies the stringent crypto tax rules in this budget, but alas, there was been no mention of cryptocurrency or blockchain in today’s budget. The restrictive crypto tax rules of India remain relatively unaltered.
Last year a 30% tax on profits and a 1% tax deducted at source (TDS) were levied on all crypto transactions. The Union Budget of 2023 has provided no relief to crypto users. The crypto, blockchain and the Web3 industry in India have not at all been mentioned in this year’s budget which has left the users quite disappointed and in a state of uncertainty.
Even before the Budget was introduced on February 1st, many speculations were making the rounds in the industry. Experts were not hopeful for seeing much change in this new budget. However despite the low hope people did expect a little reform in the crypto space, especially in wanting the government to bring down the TDS on the crypto transactions to 0.01%, or at minimum to 0.1%. Unfortunately absolutely no changes were made to the TDS applicable to crypto transactions in the budget.
India Today also reported stating that, “Moreover, according to the new tax laws, one may attract a penalty under Section 271C of the Income Tax Act if trying to avoid TDS by using offshore or non-compliant platforms. Moreover, failure to pay TDS on crypto transactions can land one in jail for up to seven years, as per Clause 119 of Finance Bill, 2023 on Page 91.” the penalty levied is in fact equal to TDS amount
Indian Crypto Experts Take on Indian Budget 2023
Post the Union Budget 2023, industry experts have tried to understand what could be the potential reasons behind the absence of crypto inclusion in this year’s budget. According to analysts, the Indian government requires additional data and time to make firm decisions on tax policies. Since it has only been ten months since the introduction of the tax laws in March 2022, there is not enough data they can consider before introducing new regulations.
Another reason that they believe contributed to why cryptocurrencies were not addressed in the union budget could be India’s emphasis on adopting a global perspective on crypto regulations, particularly with regard to a shared taxonomy. In July 2022, the finance minister called for international cooperation among G20 nations to establish a universal standard for cryptocurrencies. This could have potentially been a cause for excluding cryptocurrencies from the Union Budget.
This is what many popular and reputed names in the industry had to say about the effect of the Budget on crypto
Sumit Gupta, the co-founder of CoinDCX took to Twitter to state
Was, obviously, hoping for a reduction in income tax on VDAs but that didn’t happen. India has one of the highest taxes on VDAs in the world. This is causing Indian users to shift their investments overseas. Not good for our country and those building in this sector in India
Dileep Seinberg who is the Founder & CEO of MuffinPay and Crypto NeoBank also added to the conversation
The government has left crypto-taxation untouched, which is majorly in line with expectations. However, the government had mentioned regulation in the economic survey and the G-20 presidency is a viable opportunity for India to seek global cooperation on digital assets.
Will the G20 bring in any change?
Now that Indian Government did not mention Cryptocurrency in its Union Budget today, it is clear that Indian Govt is in no mood to give relaxation to cryptocurrency communities, and has taken a restrictive approach. It will be interesting to see how GOI takes up cryptocurrency in G20 nations meet. Implementing regulations in the crypto space would enhance accountability and openness, fostering a stable environment for industry expansion.
The Reserve Bank of India has made it a priority to develop a worldwide regulatory structure to minimize the risks posed by cryptocurrencies, stablecoins, and DeFi technologies, aligning with India’s role as a leader in the G-20.
The Indian government is cautious about the potential economic effects of implementing relaxed tax regulations for cryptocurrency in the country. However, as the usage and recognition of crypto increases among various government entities worldwide, we may anticipate some form of regulation. At present, it is uncertain how the cryptocurrency industry will persist in India.