Web3 growth hinges on taxation reforms: A Budget Wishlist
Web3 ecosystem presents a transformative opportunity for India, with the potential to redefine the digital economy, contributing an estimated USD 1.1 trillion to the GDP in the coming years, creating millions of new jobs, and strengthening the country’s global standing. India currently boasts the third-largest Web3 talent pool globally, with 12% of the world’s Web3 developers in the country, contributing to the development of the global Web3 ecosystem.
The massive Web3 talent pool residing in the country has led to innovation in diverse areas within the space. This includes decentralized finance (DeFi), metaverse, and non-fungible tokens (NFTs), among others, aiming to solve the most pressing issues facing our country. However, despite this impressive foundation, the sector’s growth is hindered by an outdated taxation framework. The upcoming Union Budget offers a crucial opportunity to address these challenges and unlock the full potential of Web3 for India’s economy.
The 1% Tax Deducted at Source (TDS) on every transaction and a flat 30% capital gains tax have created significant challenges for the ecosystem. Since the introduction of these policies in 2022, the domestic market has seen a massive 92% decline in trading volumes, with 3–5 million users migrating to offshore platforms. This capital flight not only weakens India’s Web3 landscape but also reduces government oversight and tax revenues.
