Is the 30% tax on crypto about to be removed? Will the 1% TDS not apply? Will we also get the benefit of set-off? Will crypto become completely legal in India? Will SEBI regulate crypto? These questions are no longer just on my mind or yours, they’re on the government’s too. This means that we may soon see legislation surrounding crypto in India, similar to the Genesis Act and Clarity Act in the US. Look, friends, right now there are already 200 million crypto accounts opened in India.
Cryptocurrency has only been in India for about 8 to 10 years, as the entire asset class is only 16 years old. If you look at the stock markets, they’ve been around for over 100 years, and there are about 23 crore Demat accounts in total. This means that cryptocurrency is gaining popularity rapidly in India. Just as people initially resisted Uber, then accepted it, and eventually Uber got listed, the same pattern occurred with Zomato and Swiggy before them. Then Zomato and so many..
Similarly, everyone initially resisted crypto a lot. However, now that crypto’s acceptance has grown globally, the Indian government has also initiated some regulatory activities.
Because we also want everything to be legal and formal so that everyone can participate the right way and small investors don’t get cheated. So, if you want to know all about this, make sure to watch the video until the end. And hey, before moving ahead, don’t forget to subscribe to the channel and hit that bell icon.
We need to understand why it’s essential for us to start paying attention to crypto now, as wealthy investors in India are increasingly turning to crypto assets due to the stagnation of traditional markets. But at the same time, crypto, especially Bitcoin, has delivered some really significant returns. Bitcoin’s jumped almost 80%. Last October, it was around $74,000, and now it’s in the range of $110,000 to $120,000. So, it’s given roughly 70 to 80% profit in just one year.
Inside. While Nifty has given almost 0% returns, that’s why a lot of wealthy people are now starting to consider this. Many exchanges have come up that are already FIU compliant—that means they comply with the Financial Intelligence Unit regulations and accept money in Indian rupees. You can also withdraw money in rupees.
Meanwhile, the US has announced that it will promote stablecoins. What’s a stablecoin? Stablecoins are like 1 USDT equals 1 USD. So why stablecoins? Because they know that, slowly, other countries may no longer want to work with the US dollar. You know, the BRICS nations—all of them.
They’re working on their own currency, their own common currency. So they feel there might be trouble with the dollar. That’s why they’re already adopting crypto. Why? Because they know there are only 21 million bitcoins in total. So the more coins I hold, the more power I’ll have tomorrow. BlackRock alone holds about 750,000 bitcoins. Canada has now launched a Solana ETF. So crypto adoption is growing worldwide in every way.
Technology comes along, but people just don’t get it. They resist it at first. But slowly, it sticks around, and once it consistently works, people start adopting it. That’s exactly what’s happening with crypto today. So, guys, by now you should understand why India needs this, as it has to move ahead in this race. Look, even Bhutan next door is mining crypto, Bitcoin mining, to be exact. Pakistan’s mining Bitcoin too.
These are some excellent questions asked by the Indian government. Let’s get straight to the questions from the Indian government. So, the CBDT, that’s the Central Board of Direct Taxation, has asked a few things.
The first question is: Do you think the current VDA regulations in India are adequate? And is there a need for a comprehensive VDA law?
Does India currently have enough laws for assets? For example, for the securities market, there are sufficient laws. For instance, there are complete laws governing how to list shares, how to delist, and how trading will occur.
So, first, is there a law or not? If there is, is it decent or does it need improvement? And who will monitor all this? Should it be under the Reserve Bank of India? Under SEBI? Under the Ministry of Electronics and Information Technology? Or the FIU, the Financial Intelligence Unit?
The second question is, how much Indian money has gone offshore? And why has it happened? Is it because the Indian government charges too much tax? Or is it because there aren’t enough regulations in India? Or because there isn’t enough liquidity in the country right now?
I believe it’s mainly the first two reasons—that taxes in India are very high, and currently, there’s no way to offset those taxes. For example, if you make a profit on Bitcoin, you can’t adjust it against losses from Bitcoin.
If you made a profit in Bitcoin but a loss in Ethereum, you won’t get set-off benefits. Right now, the laws and tax rules are stringent. You also have to pay a 1% TDS. The regulations aren’t clear, and it’s not clear who’s in charge. Due to these two reasons, money is flowing out of India. There’s no liquidity problem. India has a large number of traders and a considerable volume of trade. There’s no issue. If the stock market has that much volume, this market will reach that level too.
The third one is: How would you compare India’s VDA tax framework with major jurisdictions?
It’s not about the US specifically. They’re asking how India’s virtual digital asset framework stacks up against other countries—like the US, Europe, Canada, and some smaller countries. El Salvador even made Bitcoin an official currency. So what’s happening, man? How is India’s VDA tax law and framework doing compared to other jurisdictions?
Here’s the fourth question: Have you noticed any market impact because of the set-off disallowance?
Like I told you, there’ll be profit in Bitcoin and loss in Ethereum, but there won’t be any set-off for that.In your opinion, how has the 30% flat tax affected volumes? Has this 30% flat tax imposed by the government impacted volumes or liquidity in any way? Are people leaving because of this?
The Fifth Question is: What’s the biggest challenge in implementing TDS?
Identifying the counterparty’s residency status, calculating the market value of VDA, handling peer-to-peer transactions, and reporting to the Income Tax Department. Look, today you need to understand that when you go to pay your taxes, you get a document called AIS. AIS contains a report of all your transactions—what shares you bought, what shares you sold, which mutual funds you purchased, which ones you sold, when you bought your car, when your salary came in, and so on.
So, the business professional has come, but the one with digital assets hasn’t shown up yet. Now, the fifth question they’re asking is, what’s the challenge in implementing this? If we manage to implement this, too, everyone will come into the mainstream. Once they’re in the mainstream, they’ll trade smoothly. There’s no real problem or fear at all.
Next question, the sixth question: Should there be different TDS treatment for…
Market makers, retail transactions, and institutional transactions? Now that’s an excellent question. Like, if a small retail investor is trading amounts like ₹100, ₹500, or ₹2000, why apply the same rules to them? Make separate rules for institutions and different ones for regular retail investors. Just think—if mutual funds for Bitcoin, crypto mutual funds, or crypto ETFs come into play, the volume would be amazing, and the market would have a lot more buying activity. People could invest money based on their own risk appetite. People won’t be scared. However, a framework is obviously needed for that.
And the last question is, what measures could be considered to ensure a level playing field between domestic and offshore exchanges?
Especially regarding tax compliance for Indian customers. That’s an excellent question. Please let us know what we need to do so that we can be on a level playing field globally. It shouldn’t be that people in India end up at a disadvantage. Because when there isn’t a level playing field, people start shifting. Like many people from India…
People move to other countries because they realise they’re paying a lot of tax in India, but less in different countries. So, the playing field isn’t level. Those who get the chance move to a better place with a better playing field. So, isn’t it true that our playing field isn’t level, and that’s why people are leaving?
India should increase its Bitcoin holdings in asset classes, similar to BlackRock’s 700,000 Bitcoins. Since India is actually the second-largest holder of Bitcoins, and as the total number of Bitcoins is limited to 21 million, the more Bitcoins India holds, the greater our influence and power will be. We need to strengthen our country’s power and protect ourselves from our neighbouring countries, as you already know what they’re like.
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