With the Union Budget announcement around the corner, Indian cryptocurrency exchanges expect the Tax Deducted at Source (TDS) rate to be reduced and carry forward and setting off losses incurred from the sale of virtual digital assets(VDA) to be allowed. 

The government in the 2022-23 budget announcement has introduced a 30 per cent tax on gains from crypto assets and an additional 1 per cent TDS on the transfer of the said assets. These regulations have battered the trading volumes of exchanges in the last year. However, exchanges are expecting taxation changes to be made this time. 

Incentivise users

Ashish Singhal, CEO, and Co-Founder, CoinSwitch says, “India should incentivise users to stay within national jurisdiction by reducing the burden of taxes. If the TDS aims to establish a trail of crypto transactions, it can be achieved by a lower TDS rate of 0.1 per cent.” 

Exchanges are also batting for VDAs to be classified as a regulated asset class, similar to listed securities. “VDAs should be appropriately classified as a suitable asset class, similar to securities, and regulated so that investors can understand the associated risks and invest accordingly,” said Rajagopal Menon, Vice President, WazirX. 

Setting off losses

Additionally, the set-off benefits applicable to securities should be applicable to crypto assets as well, say exchanges. They expect carrying forward and setting off losses incurred from the sale of VDAs, to be allowed. 

Sumit Gupta, Co-Founder and CEO at CoinDCX opines, “Reducing the TDS to 0.01 per cent and allowing investors to offset losses against crypto gains will not only revive sentiment but also improve tax revenues in the long run.”  From an industry perspective, expectations are high that the government will introduce a progressive regulatory framework, one which will facilitate innovation and safeguard against any potential risks, he added. 

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