The Union budget 2024 is currently being presented in the Lok Sabha. Cryptocurrency enthusiasts harbor hopes for the union budget. Some of the common demands include creating a more favorable environment for cryptocurrency trading. The other demand includes reduction of TDS on Virtual Digital Assets, encouragement of long-term investments, and a regulatory framework.
Regulatory Framework
In India, there is a growing call for a regulatory framework or an established regulatory body to govern crypto transactions. The enthusiasts want this to ensure better transparency, provide clear guidelines for compliance, safeguard investors, and increase credibility and stability in the market.
Income from VDA Should Have a Parity
The Virtual Digital Assets (VDA) includes cryptocurrencies. The enthusiasts want the Union Budget to acknowledge income from VDA at par with existing income sources. For example, the government acknowledges income from traditional forms of investment such as stocks and mutual funds. Presently, the government does not legally recognize cryptocurrencies. Therefore, this minor change is necessary as it will help in simplifying tax compliance for crypto investors. It will also legitimize cryptocurrencies as a mainstream asset class.
Encourage Long-term investment
The crypto community wants the union government to develop a mechanism that improves the ability to set off and carry forward losses. Currently, no provision in the Indian taxation system allows losses from trading VDAs to offset future gains or any other income sources. Thus, it is essential to have such provisions. Therefore, this change in policies will encourage more strategic trading and encourage long-term investments.
Reduction of Tax Deduction from Source (TDS)
Many crypto enthusiasts want to reduce the high rate of tax deducted at source. Currently, the higher rate of TDS at 1% deters many investors from investing. Therefore, it leads to lower participation and lesser market liquidity. Conversely, a lower TDS rate will help in encouraging more transactions and ensure a better trading ecosystem. Another major suggestion is that the threshold for tax deduction must be increased from INR 50,000 to INR 500,000.
Also Read- Role of Crypto Payments in Cashless Societies
Bottom Line
The upcoming Union Budget on July 23 is important for the crypto industry. The crypto community’s wishlist is reasonable and can significantly improve the prospects of the industry. Tax reductions, clear regulatory guidelines, established regulatory authority, and parity on taxation of VDS can be game changers. These changes can improve investor confidence and expand the domain of decentralized finance. However, the government may fulfill expectations gradually and still retain some of the legal ambiguities related to the sector.
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