Tax on digital assets, indication of legitimisation- The New Indian Express
Web3 is redefining the future of internet, computation and even finance. Especially in countries like India, where the web3 community has been growing exponentially, recognising web3 at a governance level is a positive sign, paving the way for the growing community through crypto and DeFi adoption.
Although there are conversations around how 30 per cent taxation on any income from the transfer of virtual digital assets might discourage retail investments in digital assets, the looming threat of a Russia-like blanket ban seems to have been lifted. What induces hope even with the high taxation is the understanding that despite the regulatory uncertainty in the nation, Crypto, DeFi and NFTs were making inroads in India. The Union budget’s acknowledgement of virtual assets is an indication of its legitimisation and trust in the growing cryptocurrency space.
However, while the government’s acknowledgement of the virtual assets’ landscape seems promising, the tax levied on gains from digital assets seems prejudiced. This taxation is particularly tricky when paired with the understanding that cryptocurrency is the foundational block for web3. While the TDS of one per cent would serve the dual purpose of legitimising the space and allowing it to thrive, the 30 per cent tax on gains is glaringly preferential when compared to other long-term capital gains.
However, for startups, apart from the extended tax benefits announced, there isn’t really much to rejoice. Over the past six years, India has been witnessing a remarkable growth in startups. The main thing to look at is, what several entrepreneurs and VCs have already spoken about, is how capital gains of unlisted entities are treated. The issues related to ESOP taxation and Exit taxation need to be dealt with.
Srikumar Misra
Founder, Milk Mantra
