The day after: why the Indian crypto community is celebrating the 30 pc tax slab

After months of speculation and wait, the crypto ecosystem finally has a nod from the Government of India, albeit in terms of a tax regime. The early investors are especially rejoicing after years of roller-coaster signals from various authorities in the country. India, now, is unlikely to get a ban on crypto and that is progressive for the nation.

The announced tax regime legitimises the virtual digital asset class (including crypto and NFTs) and paves the way for a formal umbrella of regulations going forward.

With crypto being accorded the highest tax slab for any asset class at 30 percent, naturally, many outsiders are puzzled why the ecosystem is celebrating. Deductions are restricted, offsetting losses with other assets in the future is not possible and a TDS is going to be mandated.

It does seem like a strong hand aimed at discouraging trading in crypto or NFTs. But we can argue that this is a softened and a more pragmatic approach to ensure that the growth of an ecosystem does come with certain limitations before its wide ramifications are understood.

How it helps

This tax regime along with a virtual digital assets bill, when presented, will legitimise all businesses operating in the country as well as enable consumer protection for investors. A standard regulatory compliance with respect to KYC and Anti-Money Laundering (AML)/ Counter-terrorism Financing (CTF) as well as tax compliance with respect to TDS and GST will be mandated across companies and may help in weeding out certain bad actors in the ecosystem.

Exchanges and related platforms will become the legal gatekeepers of the industry. Along with the digital rupee that is purported to be enabled via the blockchain by RBI, the Indian crypto community can trade with ease as well as with certainty on their investments.

We anticipate a large growth in investor base post such an implementation as the gains from crypto and NFTs are still considerably high, and a 30 percent tax rate may not discourage them. That said, tax losses offset and carry forward are some of the things that have worked well in other developed nations and hence could be relooked at.

The government has given considerable thought on the ecosystem and has entrusted the key responsibility of tracking and reporting gains with the companies and investors themselves.

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Looking at the details

There are some nitty-gritties that need to be ironed out and explained for the common investor. Educating them in the right way will be crucial for the success of this tax regime.

We also believe that as many investors flock to the ecosystem and the government gets to understand its functioning better, we will be able to see additional discounts and adjustments being introduced in the tax slabs.

Overall, we believe that the crypto ecosystem along with its businesses and investors are primed for growth in the future. The government has already laid the foundation for a thriving and sustaining industry.