In the upcoming Budget for 2024, the cryptocurrency industry is anticipating a reduction in the tax deducted at source (TDS) rate on virtual digital assets (VDAs) from the existing 1% to a nominal 0.01%. The industry is also advocating for the government's approval to offset and carry forward losses arising from the sale of VDAs. As of July 1, 2022, the transfer of VDAs, including cryptocurrencies, has been subjected to a 1% TDS under section 194S of the Income Tax Act.
A recent report from the Esya Centre, a technology policy think tank, highlighted a notable shift of 3-5 million crypto users to offshore trading platforms following the imposition of the 1% TDS on VDA trading. This migration, according to the report, has resulted in a loss of revenue for the government, estimating Rs 3,493 crore foregone compared to the collected revenue of Rs 258 crore.
Exchanges like WazirX are emphasizing the need for allowing the offsetting of losses against gains in the crypto space. Rajagopal Menon, Vice President at WazirX, expressed the importance of maintaining a level playing field in the crypto industry without regulatory or tax arbitrage for any participant.
The global market capitalization of crypto tokens has demonstrated positive growth since the beginning of 2023. Rahul Pagidipati, CEO of ZebPay, is optimistic about a budget that acknowledges the dynamic nature of the crypto industry and provides the necessary support for its continued positive trajectory in the upcoming year.
Edul Patel, CEO of Mudrex, raised concerns about the potential hindrance to crypto adoption posed by the current 1% TDS on every transaction. Addressing this issue in the upcoming budget is deemed essential, aligning with the government's broader objectives of fostering a robust and sustainable crypto ecosystem.
