
Union Budget 2025: An ideal time to investigate the VDA chance
- Business
- January 27, 2025
In 2025, the global cryptoasset market is changing dramatically. Due to notable geopolitical changes and rising adoption rates, bullish sentiment is on the rise. Digital assets have almost become a mainstream financial asset class because to progressive laws and regulations from major countries including the US and the EU, as well as President Donald Trump’s strong support of Bitcoin and cryptoassets in the US. In an effort to update their financial institutions, emerging markets are also adopting cryptoassets more and more.
India is in a unique position to play a major role in, and even lead, the global digital asset economy at this critical juncture in the global momentum. India is currently a global Web3 powerhouse, accounting for around 11% of the world’s Web3 developer base and ranking as the second-largest developer market internationally, despite legislative uncertainty and the associated risks. Indian founders are driving innovation in AI, DePIN (Decentralized Physical Infrastructure Networks), and scaling solutions, and they currently make up 5.4% of all Web3 businesses globally.
India has the ideal chance to match its Virtual Digital Asset (VDA) plan with international developments in the Union Budget 2025, which will promote innovation, boost economic growth, and establish India as a leader in the developing digital economy. Although most of the hazards have been reduced, and efforts are being made to reduce even more, the opportunity now requires immediate action.
In order to facilitate business dealings in the VDA industry and assist the large number of Web3 developers, investors, and VDA users, India should first take into account the following tax reforms:
1. Simplifying TDS to Encourage Wider Involvement
Trading through reputable and compliant exchanges and platforms is discouraged, legitimate customers are severely discouraged, and compliance costs are imposed by the existing 1% TDS on VDA transactions. This market distortion is supported by a wealth of evidence and literature. By lowering the TDS rate to, say, 0.01%, the initial goal of implementing the TDS in the February 2022 Union Budget can be fully achieved while also facilitating transaction tracking and promoting market activity. Additionally, protecting smaller investors and fostering transparency on domestic platforms would be achieved by increasing the threshold for TDS applicability from ₹10,000/₹50,000 to ₹5,00,000.
2. Equitable Tax Policies for a Competitive Economy
India must allow the offsetting and carry-forward of losses, just like it does for other capital assets, in order to bring VDA taxation into compliance with international standards. This action will draw in institutional investors, promote ethical trading, and create an atmosphere that is fair and competitive. India’s leadership in the global cryptoasset market would be further cemented by rationalized tax rules.
Regretfully, the taxation of VDAs, which was implemented to deter trading and facilitate transaction tracking and tracing, failed to achieve these goals. After three years, it could be time to implement a clear and strong regulatory framework that provides market stability, operational transparency, and investor/user safety. India can set rules for exchanges, token issuers, and investors by incorporating international best practices, like those found in the EU’s MiCA regulatory framework. Having clear policies will protect consumers and promote innovation.
The current Bitcoin boom, which was fueled by institutional inflows and advantageous international regulations, emphasizes how urgent it is that India take decisive action. More than just an economic blueprint, the Union Budget 2025 may mark a turning point in India’s digital destiny. India can lead the global crypto revolution and ensure sustainable prosperity and innovation by adopting inclusive tax policies, thorough regulations, and public-private collaboration. Taxation without regulation may become obsolete.