With less than a week left for Union Finance Minister Nirmala Sitharaman’s interim budget presentation, people in India’s cryptocurrency sector are hoping for the introduction of a well-defined legal framework and the regularization of the tax structure to deal with tax complexities.
The digital assets industry envisions a much more nuanced approach to outlining a definition of Virtual Digital Assets (VDAs). Apart from this, policy implementation to boost innovation and research and development is also the key to a stronger crypto industry in the country.
“The tokenization of real assets is a $10 trillion opportunity and we are already witnessing the rapid advances in the field of tokenized RWAs. There is an urgent need for investment and innovation in these segments, if fueled by progressive policies, India has the potential to become a global leader in the digital asset space. We urge the government to change the VDA definition, expressly excluding tokenized assets with proven underlying value, similar to established precedents such as gift card exemptions,” said Manhar Garegrat, Country Head, India and Global Partnerships at Liminal Custody Solutions .
With the wider adoption of AI and other advanced technology, Tapan Sangal, Founder of Mai Labs, believes that 2024 is the year of “transition from basic learning to imperative application of lessons” for the blockchain industry.
“From the budget to be announced soon, our confidence in government extends to encouraging a reconsideration of the tax system for the virtual digital asset industry, fostering a regulatory environment that optimally utilizes technological innovation. Ethical considerations and robust regulations are paramount to prevent inequality and manipulation in this dynamic landscape,” Sangal said.
Manhar Garegrat also advocated for the abolition of the 1% Tax Deducted at Source (TDS), which has influenced policies that discourage domestic participation in the digital asset market.
“This incentive will attract investment, generate high-skilled jobs and consolidate India’s position as a global leader in safekeeping of digital assets. Just like stocks, users should be allowed to compensate losses related to digital assets, which will encourage more startups to enter this space, ” noted Garegrat.
For the industry to flourish in the country, it is important that the government not only focuses on tax regulation but also on Web3 startups and creating special economic zones.
“The Web3 industry is eagerly looking forward to the Union Budget looking forward to provide a new opportunity to support a thriving and responsible Web3 ecosystem in India. Web3 and blockchain, going forward can solve many of India’s challenges in sectors like payments, education, healthcare, etc,” said Nischal Shetty, co-founder of Shardeum.
According to Shetty, the introduction of specific domestic regulations for India for greater stability, and dedicated funds for indigenous blockchain products would help in the development of the Web3 ecosystem.
Underscoring the need for tax incentives and sandboxes, Shivam Thakral, CEO of BuyUcoin said, “We need tax incentives and sandboxes to nurture these seeds into thriving startups. Sandbox initiatives need protection to foster experimentation. This will create a new generation of jobs, will propel India into the global DeFi and blockchain space, and unlock economic growth. By embracing crypto with vision and collaboration, India can lead the world to a digitally inclusive financial future, leaving competitors in the shadows.”
With the presentation of an interim budget and a full-fledged budget post-election, the cryptocurrency sector is waiting for the introduction of a tax framework and nuanced legal regulation to unlock its true potential.
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Published: 26 Jan 2024, 22:03 IST