Budget 2024: Crypto community seeks reduction of tax deductions on transfer of digital assets

Parliament monsoon session begins tomorrow i.e. July 22. Finance Minister Nirmala Sitharaman will table the union budget on July 23. It will be the union government’s first budget after May 2024 elections results. Ahead of the union budget 24-25, the cryptocurrency community is pressing for several key changes that could significantly impact the industry. A report by Economic Times states that these proposals aim to create a more favorable environment for cryptocurrency trading and blockchain technology adoption in the country.
Key demands of the crypto community includes:

Reduction of TDS on transfer of VDAs

A key proposal of the crypto community is to decrease the Tax Deducted at Source (TDS) rate on Virtual Digital Asset (VDA) transfers under section 194S from 1% to 0.01%. The current TDA rate, the report states, acts as a deterrent for investors, leading to reduced market liquidity and participation. Reducing this rate the crypto currency community says can stimulate more transactions and promote a more robust trading environment.

Revise the threshold limit for tax deduction

Furthermore, the community has recommended to reconsider the tax deduction threshold under Section 194S. It proposes an increase from Rs 50,000 to Rs 5,00,000.

Setoff and carry forward of losses

Stakeholders in the cryptocurrency sector have further advised to offset and carry forward losses, similar to other industries. At present, losses from Virtual Digital Asset (VDA) trading can’t be carried forward to balance future VDA gains or other income, which hampers long-term investment and strategic trading decisions. The community states that introducing this flexibility would bring the crypto market in line with other financial markets, helping in developing a more stable and attractive environment for investors.