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Crypto players welcome taxation of crypto assets & introduction of CBDC in Budget 2022

The players say the taxation of digital assets legitimises crypto and boosts the confidence of the industry

The Union Budget 2022 has been welcomed by the crypto exchange players in the country. The players have welcomed the decision by Finance Minister Nirmala Sithraman on taxation of income from digital assets.

Meanwhile, Sitharaman also announced that the Government will soon be launching a digital currency by the RBI using blockchain technology. 

Centre announced that income from digital assets will be taxed at 30% and a 1% TDS will also be applied on transactions which cross a certain threshold. According to Crypto exchange players, both these moves will further strengthen the sector and bring in more confidence among the public about digital assets and the crypto industry. 

Sumit Gupta

Sumit Gupta - Co-founder and CEO, CoinDCX, said the budget will help the country create a modern, powerful, and sustained digital growth. “We welcome the budget and congratulate the Finance Minister for a futuristic budget. The taxation of Virtual Digital Assets or Crypto is a step in the right direction. It gives much-needed clarity and confidence to the industry. India's focus on digital innovation and the promotion of blockchain technology is welcome.” 

He further said the introduction of Central Bank Digital Currency, (CBDC) sends a clear signal of India being a digital-first, efficiency-driven, and transparency-led system. “CBDC, with the backbone of Blockchain, will help us hold a powerful position in the global economy. We welcome the move and congratulate the government for this visionary move.” 

Avinash Shekhar

Avinash Shekhar, CEO of ZebPay, said the announcement on the launch of a Digital Rupee using blockchain issued by the RBI will familiarise Indians with the benefits and efficiency of virtual currency, building an appetite for the crypto, blockchain, and the multitude of innovations and employment opportunities that the technologies are capable of fostering.

He stated that the Budget focused heavily on integrating technology across sectors, and the gradual acceptance of a digital currency, blockchain, and virtual digital assets has the potential to make India a leader in this new paradigm of blockchain-enabled revolution. 

Shekhar said, “Tax has always been applicable to gains on virtual digital currencies, but the ecosystem did not have clarity on it. The move to tax virtual digital assets gives the entire ecosystem, including investors and exchanges, transparency on the road ahead. 30% tax on income from virtual digital assets, while high, is a positive step as it legitimises crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs across stakeholders in the country. The government has come a long way in its stance towards crypto from last February to today and we are confident that this will herald a new era of growth and innovation for India in a Web 3.0 world.” 

Kunal Chowdhry

Kunal Chowdhry, CEO, Apollo investments said, “The fact that the Govt is imposing a 30% tax on all income from crypto trading means that the Government is formally acknowledging crypto’s legality in India. Interestingly, the introduction of the digital rupee also lends credence to the hypothesis that crypto will never be recognised as legal tender in India, but more likely as an investment asset class.” 

Keyur Patel

On the other hand, Keyur Patel, Co-Founder and Chairman of Guardian Link, feels the two moves might initially create some friction among the public or the investors in understanding the industry. 

“Virtual assets as lumped into one by Government implies crypto and NFTs all under the same bucket. For crypto, no deduction other than the cost of acquisition is to be allowed. No set-off is permitted against other income or losses, as well as tax withholding to be triggered on sale at 1% beyond a certain threshold. This implies huge friction initially, until the user base understands that all asset classes must be taxed for holistic economic growth. Initially, in the space, it will create a major roadblock for the investor community but like all ecosystems, this too shall evolve. These asset classes being treated differently creates one-sided tax implications versus using Crypto as a traceable asset and NFTs or Gaming Virtual Goods are Entertainment assets/Collectible assets like Digital Music or Digital Art,” Patel said. 

“It is version 1.o of the framework, while we understand regulation to control other elements of crypto are required. NFTs are nascent in its classes and with such taxation will have to eventually adjust to grow the developing ecosystem. Worldwide NFTs are still classified as non-taxable assets, and it is imperative that the adjustment in understanding that Crypto token is different than digital NFT is token is taken into consideration for future amendments and allow industries like Gaming, Interactive Immersive Museums, and other edutainment NFT frameworks succeed without the tax burden,” he explained. 

Ashish Singhal

Ashish Singhal, Founder and CEO, CoinSwitch and Co-chair Blockchain and Crypto Assets Council (BACC), stated the measures taken by the Centre in this budget will help people adapt to newer types of investments. The CBDC will further accelerate digitisation of the country. 

“The regulatory guidance on tax from the government furthers the mainstreaming excitement of this emerging asset class with over $ 6 billion worth of investments in India. It is also the gateway to the future decentralised world, aka Web3.0. Today’s digital-savvy Indians are willing to experiment with this emerging asset class. The budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer. We hope to work with the government to help bring crypto-asset taxation at par with other asset classes and participate in the central government’s vision to promote economic growth,” said Singhal. 

Melbin Thomas

Expressing similar thoughts, Melbin Thomas, Co-Founder of Sahicoin, stated the moves will eliminate a lot of misconceptions about crypto assets and pave the way forward to classifying them as a separate asset class. 

He said the  Government-mandated 1% TDS for every trade will enable it to track crypto transactions and provide much-needed visibility on the holders and users of crypto assets. “The Digital Rupee (CBDC) will be a game-changer for the Indian economy. It will enable efficient and cheaper currency issues and circulation. This is not only a win for Digital India but also for the adoption of blockchain technology, opening up new doors for innovation, monetary efficiency, and a robust economy. For the long term, India will have the necessary infrastructure in place to emerge as a global financial technology leader in the coming decades,” added Thomas. 

Nischal Shetty

Nischal Shetty, CEO of WazirX, said it is interesting to note how the Government has begun to recognise crypto as an emerging asset class given how the FM was referring to it as a virtual digital asset. According to him, the biggest development today was the clarity on crypto taxation. 

“The tax clarity is a welcome move. Overall, it’s a huge relief to see that our government is adopting the progressive stance of going ahead in the direction of innovation. By bringing in taxation, the government legitimises the industry to a large extent. The majority of people, especially corporates, who have been sitting on the side-lines because of uncertainties will now be able to participate in crypto. Overall, it’s a positive move for the industry.” 

“This will add the much-needed recognition to the crypto ecosystem of India. We also hope this development removes any ambiguity for banks, and they can provide financial services to the crypto industry. Overall, it's good news for us, and we will need to go through the detailed version of the budget to understand the finer details,” he added.

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