Sumit Gupta: Regulation of crypto is pending but the government’s move to tax it gives it some form of legitimacy. The point on whether it is regulated is a parallel discussion.
The government’s proposal to tax income from digital assets has come as a shot in the arm of the intermediaries that offer investments in cryptos and blockchain players. Ashish Singhal, founder & CEO of CoinSwitch and co-chair of Blockchain and Crypto Assets Council, and Sumit Gupta, CEO & co-founder of CoinDCX, believe that the government’s move brings legitimacy to the industry, as the government is engaging with the industry to understand it better. In an interview with Malini Bhupta, Singhal & Gupta say that with the government’s move to tax, more seasoned investors will come in as there is some clarity. Edited Excerpts:
The finance minister has decided to tax income from digital assets. What is the industry’s view on this move?
Sumit Gupta: Even though the Bill is yet to be tabled, the government’s move to tax income from digital assets is a good sign. It shows intent to regularise the industry and not ban it. Overall it also brings legitimacy to the whole industry. On the taxation part, we feel it is on the higher side with no carry forward and offsetting being allowed, which could be a dampener. It would be best if digital assets are treated on par with other securities such that they attract long-term and short-term capital gains tax.
Ashish Singhal: Apart from the percentage, it is a positive development for the crypto industry as it removes some of the ambiguity that was there. It is a signal that the government recognises this industry. We have seen $6 bn worth of investments in this asset class. The narrative is now about learning the industry yet it is hard to know where the conversation will go.
What about the 1% withholding tax and how will that be deducted?
Sumit Gupta: The 1% TDS is hard to interpret is what tax experts tell us. As per my understanding, Section 194O says that the 1% TDS has to be deducted by the marketplace, but 194S says the person receiving the consideration has to pay. We will be approaching the government for a clarification. We did not get a clear understanding of the clause and what exchanges need to do.
Does the Budget legitimize crypto?
Sumit Gupta: Regulation of crypto is pending but the government’s move to tax it gives it some form of legitimacy. The point on whether it is regulated is a parallel discussion.
As an industry we have submitted our point of view to the government in November and discussions are ongoing. Looking at the developments, we are hopeful that the government is looking to regulate it and we have not seen any indication of a ban right now.
What was BACC advocating to the government over the last one year?
Ashish Singhal: The first expectation was removing the currency use case and treating it like an asset class. A lot of our effort was on explaining that part. As is seen in the Budget, there is a clear demarcation between digital currency’s use case and digital assets like crypto and NFTs. While cryptos like Bitcoin and Ethereum would be treated as digital assets, RBI’s digital currency would be treated like a currency.
Will digital assets become mainstream now or will they remain for a very niche audience?
Ashish Singhal: Even today cryptos are not niche. Crypto investments have seen a new class of younger investors, while equities attract a more seasoned base of investors. With the government’s move to tax, more seasoned investors will come in as there is some clarity. We believe the move will have a positive impact with more money flowing into this asset class.
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