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Февраль
2022

Union Budget 2022: Slightly bittersweet, but largely positive — Sumit Gupta, Co-founder, CoinDCX

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By Sumit Gupta

At the onset, this is a very progressive and futuristic Budget. It highlights India’s focus on digital innovation and the promotion of blockchain technology. It has touched key points that will help us create modern, powerful, digital, and sustained growth.

Introducing the central bank digital currency (CBDC) is a strong move of India sending a clear signal of being a digital-first, efficiency-driven and transparency-led system. Developed using blockchain technology, the ‘Digital Rupee’ will be introduced by RBI in a phased manner and can potentially reduce the dependency on cash, lower transaction costs and even offer reduced settlement risk by virtue of the immutable nature of blockchain-based transactions.

Taxation of virtual digital assets or crypto is a step in the right direction. It gives much-needed clarity and confidence to the industry. However, I would also like to point out that it is two steps forward and one step back.

While taxation brings legitimacy to the industry, the tax quantum is something that is discouraging. The Budget announced a crypto tax regime that will subject income from crypto-related transactions to a tax rate of 30%, on par with that imposed on gains from speculative activities like lottery, gambling, and other gaming activities. This might act as a dampener for greater adoption. Moreover, while profits from crypto trading will be subjected to a 30% income tax rate, losses will not be allowed to be set off against other losses or be carried forward. To compound matters, crypto retail investors and exchanges alike will have to contend with a TDS (tax deducted at source) of 1% that will be applicable on the purchase or sale of digital assets above a certain threshold. No mention of the threshold limit has been made in the Budget, although it can be in line with that imposed on other assets like gold currently. This move will inhibit retail investors from making large transactions and have a subsequent impact on trading volumes seen across crypto exchanges. Also, gifts when received in the form of crypto assets like cryptocurrencies and NFTs will be taxed in the hands of the recipient, which is aimed at preventing money laundering activities.

The Budget is thus slightly bittersweet, but largely positive. We must remember this is just the beginning of the larger process of adoption, and multiple discussions are needed to come up with better systems or processes. But we are very hopeful that right actions will be taken to help India chart out a digital-led growth strategy to power towards the goal of a $5-trillion economy by 2025.

The author is Co-founder & CEO, CoinDCX




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