In a significant development that indicates that the Indian government may not fully agree with the central bank’s overly hostile stance against cryptocurrencies, a junior minister explained that such activities are acceptable as long as they follow the laws. in force.
This is in stark contrast to the Reserve Bank of India (RBI) ban on crypto in 2018 and the incomplete opening to the sector even when the Supreme Court struck down the RBI order in 2022, calling it illegal.
Crypto is doing well
“There is nothing today that prohibits crypto as long as you follow the legal process,” said Rajeev Chandrasekhar, state minister for information technology and electronics. Told an event on Thursday.
These remarks are important because the Indian government will present the annual budget for the next financial year on February 1st.
Local crypto exchanges and investors who have faced an extremely hostile regulatory environment – from high taxation to denial of banking services – have requested and expect relief to be announced in the budget proposals, which will come into effect. force after deliberations in parliament. , from April 1st.
“In particular, through our representation for the next Union budget 2023-2024, we have suggested that the TDS rate be reduced to 0.01%. This lower rate will help Indian VDA companies to offer competitive prices to Indian VDA users and protect them from exposure to unregulated overseas markets,” said Sumit Gupta, co-founder and CEO of CoinDCX, in a statement. communicated.
RBI’s tough stance
Over the past few months, RBI Governor Shaktikanta Das has described cryptocurrencies as something with no underlying value and a poor cousin of gambling, which can lead to dollarization of the economy. and even trigger a global financial crisis if efforts are made to regulate and permit them. To work.
But a recent Nasscom study suggests that India’s talent pool is driving the global Web3 surge and accounts for at least 11% of the workforce. This also highlights the fact that more than 60% of Indian Web3 startups are registered outside the country due to the unfavorable regulatory environment. Available data suggests that at least 7% of Indians hold or have transacted crypto.
Ecosystem Pain points
At present, the sore point of the Indian crypto ecosystem is the high tax regime which provides for a 1% transaction tax and a 30% tax on gains made on cryptocurrency transactions. The logic of the government to introduce a 1% tax on crypto transactions was to track all such transactions for tax purposes.
Crypto industry players such as Sumit Gupta have argued that this goal can be achieved by levying a lower tax rate. As high taxes and strict regulations have prompted several startups to leave India for favorable jurisdictions such as Singapore and Dubai, the government is expected to ease them to “nurture innovation” in the blockchain space. .
India’s tax authorities have collected around $7.4 million in taxes from crypto transactions since their implementation in July until mid-December. Low tax collection is another argument advanced in favor of reducing the transaction tax, which proves to be prohibitive.
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