India’s new crypto tax policy is modelled after the country’s gambling and lottery ticket winnings tax guidelines, which take effect on April 1.
The Indian Finance Bill 2022, which includes new 30% crypto tax laws, was adopted by the Rajya Sabha, the Indian parliament’s upper house, today, making it a law that will take effect on April 1.
The upper chamber of parliament must approve the bill within a week following the lower house’s (Lok Sabha) approval.
The Finance Bill was introduced in January during the parliament’s budget session 2022-2023. The Finance Bill changed tax regulations to levy a 30% crypto tax on holdings and exchanges of digital assets. Apart from that, traders cannot deduct losses from profits, and each trading pair will be treated separately for tax purposes.
As per the new amendment proposed in the Finance bill 2022 to sections of crypto tax.
Loss cant be set off against any profit. Similar to betting tax rules. #reducecryptotax
— Aditya Singh (@CryptooAdy) March 25, 2022
As if a 30% tax wasn’t regressive enough, the government slapped a 1% tax deduction at source (TDS) on each trade, stating it would assist them in tracking finances. However, exchange operators have cautioned that a 1% TDS would result in a loss of liquidity.
Numerous analysts, traders, and exchange operators have analysed the controversial bill. However, the government chose to proceed with its regressive strategy without consulting the crypto ecosystem’s stakeholders.
Another source of outrage within the cryptocurrency community is the fact that the new crypto tax was significantly influenced by countries’ gambling and horse betting tax laws. This demonstrates that the Indian government views the cryptocurrency market as a form of gambling.
“It is not illegal to buy/sell crypto assets in India but we have put taxation treating it like winnings from horse races..” -T.V Somanathan (India Fin Secretary).
It has more to do with their view than just tax. #reducecryptotax #faircryptotax Day-53 #IndiaWantsCrypto @Unocoin
— Sathvik Vishwanath (Unocoin) (@sathvikv) March 26, 2022
India’s new cryptocurrency tax policy was finalised and approved in less than two months, but the Finance Ministry has yet to provide a regulatory framework for the embryonic market, despite years of assurances. Numerous crypto entrepreneurs in the country feel that such a move will result in a brain drain of talent, with traders eventually turning to decentralised exchanges and foreign platforms to conduct crypto trades.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.