‘We Have Entered a Period of Pain,’ Says WazirX CEO on India’s New Tax Laws
India passed tough tax legislation, and Nischal Shetty, the CEO, and founder of WazirX, one of India’s largest stock exchanges, didn’t mince words when he said, “We have entered a period of suffering.”
“It’s almost like not allowing the sector to function, and what will happen is what occurred with the drone industry, where China eventually became the dominant drone industry,” Shetty, India’s most prominent crypto figure, said. “All foreign technology will now dominate in India, and we don’t want that to happen in crypto.”
Nischal Shetty, the CEO of Wazirx India and a leading figure in India’s crypto economy, is outspoken in his criticism of the country’s new tax regulations.
Nischal Shetty, one of India’s most influential people in the crypto business, discusses what’s at stake with the country’s new tax regulations in an interview.
He went on to say that the move is particularly harmful to India’s youth.
“Our customers are our top priority.” Cryptocurrency is a source of income for millions of people. They lost their jobs during the [coronavirus] outbreak, and crypto was one of the reasons individuals survived. “We are concerned about the loss of their livelihood and dreams… these are people between the ages of 18 and 30,” Shetty said.
Shetty’s main concern was the 1% tax deducted at source (TDS), which would be imposed whenever an Indian bought or sold cryptocurrency. “The 1% TDS will suffocate liquidity, which means everyone’s profitability will suffer.” “It’s a lose-lose situation,” Shetty explained.
People will now “find methods to not be part of the system,” according to Shetty.
People will be pushed to use other channels, such as peer-to-peer and one-to-one trade. We had worked so hard as an industry to ensure that everyone went through the proper channels, millions of people going through KYC [know your customer standards]. “The other concern now is that this may revert to a grey market or non-KYC method,” Shetty said.
According to Shetty, the decision to not allow crypto losses to offset gains is even worse than the 30% capital gains tax on crypto profits. Because of the way the new taxes work, he emphasized that Indian investors may lose more money than they invested in some situations.
‘A nuclear strategy.’
“We cannot give up,” Shetty said, putting on a brave front. He used the example of India’s central bank’s effective ban on banks interacting with cryptocurrency exchanges in 2018. An appeal to the Supreme Court resulted in a positive ruling for exchanges at the time.
“We went after it with the banking prohibition.” It took two years, but the right thing happened in the end. I believe the right thing will happen here as well, but it will take time, and there will be grief.”
Will WazirX, as one of India’s top cryptocurrency exchanges, go to the Supreme Court this time?
“If that’s an option, it’s a last-ditch nuclear option.”
“Dialogue will be the greatest way to ensure that everyone feels at ease and understands the complexities of crypto as a sector,” he said.
Several crypto sector figures indicated to CoinDesk that if the planned crypto taxes become legislation, they will explore filing an appeal with the Supreme Court.
Now we will understand what exactly is the tax structure.
Tax structure in India
Taxes are the government’s most significant source of revenue. The money received from taxes is used by the government for a variety of projects aimed at the nation’s growth. India’s tax system is well-organized, with a three-tier federal framework.
The federal government, state governments, and local governments make up the tax structure. When it comes to taxes in India, there are two types: direct and indirect taxes. Income tax, gift tax, capital gain tax, and other direct taxes are examples of direct taxes. In contrast, indirect taxes include value-added tax, service tax, goods and service tax, customs duty, and other indirect taxes.
Customs duty, central excise duty, income tax, and service tax are all levied by the Indian government. State governments levy income tax, state excise duty, professional tax, land revenue, and stamp duty on agricultural income.
In India, taxes are separated into two categories: central and state government taxes, and there are two sorts of taxes:
- Direct taxes
- Indirect taxes
In India, direct taxes are imposed on your profits, while indirect taxes are imposed on your expenses. The earning party, whether an individual, a HUF, or a company, is responsible for depositing the direct tax liability.
Is cryptocurrency taxed in India?
A cryptocurrency is a decentralized digital asset and a medium of exchange that uses blockchain technology to operate.
Cryptocurrencies are digital currencies that can be used to buy goods and services the same way that other currencies can. However, it has been primarily controversial since its inception due to its decentralized nature, which means it operates without the use of any intermediaries such as banks, financial organizations, or central agencies.
In today’s digital currency world, more than 1,500 virtual currencies are traded, including Bitcoin, Ethereum, Litecoin, Dogecoin, Ripple, Matic, and others.
The Indian government has yet to provide cryptocurrencies with the status of legal money.
RBI attempted to enforce a ban in 2018 by restricting banking services to crypto exchanges. The restriction, however, was overturned by the Supreme Court, which concluded that virtual exchanges violate basic rights.
Because the Reserve Bank of India (RBI) has not yet legalized bitcoin, it is subject to taxation. An investor who makes money by selling bitcoin must pay income tax.
All income is taxed unless it is specifically exempted by the Income Tax Act. Investors must pay income tax on crypto-transactions based on the nature of the transactions until we receive clarification from the income tax department.
Gains on crypto-transactions would be taxable as Business income or (ii) Capital gains under regular income tax regulations. The goal of the investors and the nature of the transactions will determine this classification.
Gains from bitcoin transactions will be taxed as ‘business income’ if there are frequent exchanges and significant volumes.
“We compete with the rest of the globe,”. I’d be concerned if this was confined to a specific area. As a result, the government will soon see that it is “losing market share and opportunities,” which, if not seized, “will be stolen by other countries” such as China or the United States.
“Right now, what we’re working on is delivering information and points to the appropriate authorities,” Shetty added, “but what’s been missing is regular communication, like we see in the United States.”
Edited by Prakriti Arora