The triple whammy of the Union Budget - 30 per cent capital gains tax, 1 per cent tax deducted at source (TDS), and inability to meet or carry forward the deficit - casts a dark shadow on this sunrise sector.
Of course, it is a matter of great relief that we have moved to a regular tax structure from 10 years in jail and a fine of Rs 25 crore in the 2018 Bill. In such a situation, while this recognition is a very good thing overall, but the way taxes have been proposed, it seems that the government has taken this decision very hastily. This could lead to a loss of new opportunities and global leaders such as Jack Dorsey and Elon Musk are aggressively targeting industry participants to expand in this space.
More importantly, any tax strategy should be fair to the citizens of the country and encourage them to declare their stake honestly. Given the small number of taxpayers and the presence of excellent tax planners, a uniform rate of 30 per cent may encourage people to find ways to evade these stringent tax laws. Ideally, a tax rate of 10-15 per cent makes more sense as the majority of investors' share in the market is between Rs 5,000 and Rs 1 lakh. Very few people invest more than this. An easier way would have been to use the existing slabs as per income level for taxation.
How cryptocurrencies will be taxed after Budget 2022
For example, all the proposals of the Union Budget will not be implemented from April 1, 2022. Some will come into effect from July 1, 2022, and others from April 2023. Another important point, the acquisition cost has not been. There is a huge potential market for the industry with 'nodes as a service' for existing crypto miners and future industry opportunities. 'Nodes as a service', typically provide an API (Application Programming Interface) key that can be used to write to and read from the blockchain. This is a significant omission as India is seen as a technology factory for the world due to its immense talent and infrastructure. And if regulated properly, it has the potential to become a 'multi-billion dollar' market. Currently, we are at the crossroads of potentially massive opportunity loss that could change the fate of our people and country. For global companies and exchanges, such strict guidelines and discrepancies are a clear 'red flag'.
Another shocking fact is that any income received by a trust will be taxed at 30 per cent. Let us not forget that one of the largest crypto-led charity initiatives in India, focused on COVID, raised hundreds of millions of dollars in just a few weeks (cryptorelief.in). A tax of 30 percent would also discourage philanthropy. What is discouraging is that start-ups get tax breaks, but cryptocurrencies at the forefront of the Web 3.0 ecosystem are heavily taxed. And clearly, discouraging new entrants is not going to take India to new heights. Instead. This would encourage them to go out for the benefit of other nations.
There's a reason Facebook named itself Meta (Metaverse - Web 3.0), and Jack Dorsey is building a new decentralized social media platform called Blue Sky. Dorsey also left Twitter to focus on a crypto-focused company (Square). These visionary entrepreneurs have recognized the potential of this ecosystem and have taken the first step in this direction. In India, the crypto ecosystem should be regulated with a better tax and incentive framework, we have an opportunity, and we must accept it.
How the budget tax body has affected middle-class cryptocurrency investors Lack of jobs and opportunities
Sample of this: Before the Union Budget, we were getting inquiries from one of the leading crypto exchanges interested in India. Their plans are now being seen in cold storage. And it's not just the tax aspect that is problematic anyway.
Due to the complexity of cryptocurrency, the government seems to have found an easy way out. However, due to the strength of our population, India is a huge potential market for crypto. But due to high rates of Goods and Services Tax compliance, TDS compliance and tax, it seems very difficult for international organizations and exchanges to start operations in India and create huge employment opportunities and direct investments in our country. Currently, Indian exchanges and crypto-centric companies employ about 10,000 young Indians. In addition, Indian developers are getting huge freelance opportunities from all over the world. This will promote a second round of brain drain from our country.
I hope that the new rules will take into account all these aspects and give adequate impetus to the industry so that the international community can see the Indian market more favorably. This is the moment. We must not lose it.
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