July 25, 2024
By Anjali Kochhar
The announcement of Budget 2024 by Finance Minister Nirmala Sitharaman on Tuesday, July 23, revealed no changes to the existing tax regulations on virtual digital assets (VDAs). While some crypto experts had hoped for a reduction in the tax deducted at source (TDS) on VDA transfers under Section 194S to 0.01 percent, the current tax rates remain unchanged.
This decision has been met with mixed reactions from the crypto community. On one hand, the stability in tax rates provides a predictable environment for existing investors, which can help support steady market growth.
Edul Patel, CEO and co-founder of Mudrex, highlighted this aspect, stating, “Maintaining the current tax rates provides predictability for existing crypto investors, which will help support steady market growth.”
On the other hand, the unchanged tax laws might deter new investors and slow down the sector’s growth. Patel added, “Not updating the crypto tax laws might deter new investors and slow the sector’s growth.” The existing tax regime, which includes a flat rate of 30 percent on gains from VDAs and a 1 percent TDS on every transfer, could pose a barrier to broader adoption and investment.
Despite the unmet expectations regarding crypto taxes, Budget 2024 introduced several changes in capital gains and trading activities. The tax rate on long-term capital gains (LTCG) for all financial and non-financial assets will increase from 10 percent to 12.5 percent. Additionally, the tax rate on short-term capital gains (STCG) for certain financial assets will rise from 15 percent to 20 percent. These changes reflect the government’s focus on adjusting tax policies to align with broader financial goals.
JPMorgan expressed that the Budget did not significantly broaden India’s growth drivers beyond infrastructure and services, with no real push to diversify. Despite talk of skilling, budgetary allocations remain minimal. However, reducing the borrowing target to 4.9% provides comfort for meeting future GDP goals. Understated revenues suggest the bond market should feel positive, as this pattern of outperforming targets has been consistent in recent budgets.
Budget 2024, which marks the seventh consecutive presentation by Nirmala Sitharaman and the first in Prime Minister Narendra Modi’s third term, largely emphasised major tax changes and employment creation initiatives. Positive steps such as initiatives to boost employment, skill development, and tax relaxations for angel investors were also announced, which could drive innovation in the Web3 and tech sectors.
Overall, while the decision to maintain the current tax rates on VDAs has its advantages and disadvantages, the broader impact on the crypto sector will depend on how these tax policies influence investor behaviour and market dynamics in the coming months.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
