Why VDA taxation needs attention in the Budget 2023
A recent study reported a shift in India’s cumulative trade volume in VDA to the tune of ₹32,000 crore from February to October 2022.
In India, the relationship between regulators and the crypto community has been tumultuous. While the legal status of cryptocurrency in India is still ambiguous, Union budget 2022 had set the stage for taxation of Virtual Digital Assets (VDAs) by introducing a three-pillar tax regime: income arising from transfer of VDA to be taxed at a flat 30% rate, 1% withholding tax, and limitations on offsetting of losses on VDA transactions. There has been a massive exodus of crypto players from India to overseas markets and it shows the negative effects of the VDA tax architecture within a year of its introduction. A recent study reported a shift in India’s cumulative trade volume in VDA to the tune of ₹32,000 crore from February to October 2022. Numerous recommendations to change VDA taxation, thereby reducing tax burden and eradicating ambiguities, have been made to the government for the upcoming budget.