No relief in 30% tax rate: How does crypto market in India benefit post Budget?

Rajagopal Menon, Vice President, WazirX said, “The Indian Union Budget 2023 made no changes to existing crypto taxes, leaving Indian crypto companies on the Stairway to Heaven. There is lingering uncertainty because of high taxes and a lack of a solid regulatory framework which are stifling progress in the industry.”

Menon added, “The budget will not have any more negative consequences for the crypto industry. Since 2017, last year was the worst year on record; any change will be for the better. Trade volumes on Indian exchanges may remain flat at rock bottom.”

However, WazirX VP is optimistic about developments such as Digilocker, KYC norms, and National Data governance policy.

In her budget speech on Wednesday, FM said, “a one stop solution for reconciliation and updating of identity and address of individuals maintained by various government agencies, regulators and regulated entities will be established using DigiLocker service and Aadhaar as foundational identity.”

To enable more Fintech innovative services, Sitharaman announced, the scope of documents available in DigiLocker for individuals will be expanded. Also, she said, an Entity DigiLocker will be set up for use by MSMEs, large businesses, and charitable trusts — which will be towards storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks, and other business entities.

Also, the FM announced that the KYC process will be simplified by adopting a ‘risk-based’ instead of ‘one size fits all’ approach. While to enable access to anonymized data, she said, National Data Governance Policy will be brought out.

On Digilocker and KYC measures, Menon said, “It’s a fantastic project since it makes life easier for the average person. DigiLocker can help firms ease the KYC (Know Your Customer) process by offering a secure, electronic version of personal papers that can be easily shared. This eliminates the requirement for physical document submission and verification, making the process more efficient and comfortable for both the customer and the enterprise. Furthermore, the DigiLocker application’s one-stop solution for identity and address updates can ease the process of changing personal information, decreasing the time and effort required to make these modifications across numerous businesses.”

Further, he added, “it’s a big step to abandon the “one size fits all” approach to Know Your Customer (KYC) procedures. It can help by enabling for a more tailored and risk-based approach to client identification and verification. By decreasing the quantity of extraneous information and documents needed, this can lead to a more efficient and effective KYC process, as well as a better customer experience. Furthermore, adapting the KYC process to the individual risks posed by each customer can help to improve the business’s overall security and compliance.”

In regards to the National data governance Policy, Menon believes the initiative is excellent. He added, “A national data governance strategy has the potential to protect personal data privacy and security while also promoting data interoperability and accessibility. It will promote data-driven innovation, enhance transparency and accountability, and improve data quality and reliability. The policy can set norms and laws for data collection, storage, and use, supporting data management and responsible data use.”

Meanwhile, Punit Agarwal, Founder KoinX said, “Although the crypto industry was expecting relief from the aggressive tax introduced in the last budget, there was no mention of any changes related to crypto in the Finance Minister’s speech. However, the government has clarified penalty provisions on crypto TDS. This will be a significant hit to investor sentiment. In addition to a hefty penalty, failing to pay TDS can land a person in prison for up to 3 months to 7 years. Investors will need to re-evaluate their trading activities and ensure they are in compliance with all applicable TDS provisions.”

Whereas Dileep Seinberg, Founder, MuffinPay believes, no bad news for cryptos should be considered good news.

Seinberg said, “The government has left the crypto taxation untouched, which is majorly in-line to the expectations. However, the government had mentioned them in the economic survey and the G-20 presidency is a viable opportunity for India to seek global cooperation on digital assets. It was pretty well expected from the current budget. There will be no regulations coming on Crypto before the election and clarity from global counterparts. Although it is well appreciated that the Government has acknowledged the power of Web3 & Metaverse and its utility in the Agriculture sector. It will unleash innovation and research by start-ups and academia, a National Data Governance Policy will be brought out. This will enable access to anonymized data.”

Also, as per Avinash Shekar, Founder and CEO, TaxNodes, the focus on the youth and providing opportunities to skill them will address the talent crunch being faced in the technology space, particularly in the Web3 domain. Though there is no mention of crypto taxation in the Union Budget, this year’s economic survey indicates the importance of a robust Web3 ecosystem and transparent regulation. He added, “startups like ours are going to play an active role in promoting safety and stability in the crypto space.”

Although, the market still hope for a reconsideration in tax rate levied on virtual digital assets going ahead. Menon said, “We hope that the government will reconsider its position on crypto taxes and work with the industry to create a regulatory framework that supports and encourages growth. We believe that with the right support and guidance, the crypto industry can play a major role in driving innovation, job creation, and achieving the 5 trillion dollar economy dream of an Atmanirbhar Bharat.”

Disclaimer: The views and recommendations made above are those of individual analysts or companies, and not of Mint.