- Indian Finance Minister has announced a 30% tax on gains from digital assets.
- Cryptocurrency Exchanges have welcomed the development.
- Opposition slam the Government for lack of clarity.
YEREVAN (CoinChapter.com)- India has finally taken an official stance on cryptocurrencies. After months of delay and speculations, the Narendra Modi-led government has decided not to ban digital assets. However, it has instead levied a hefty 30% tax on all gains from cryptos like Bitcoin (BTC).
India’s Finance Minister Nirmala Sitharaman announced her ministry’s decision while presenting the annual budget in Parliament on Tuesday. According to the Minister, there has been a phenomenal increase in transactions in virtual digital assets. The sheer magnitude of these transactions has made it imperative for the Government to impose a special tax regime.
“Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30%,”she said.
Sitharaman informed that they would not allow deduction regarding any expenditure or allowance while computing income from crypto gains.
Traders can only deduct the cost of the acquisition of the asset. In addition, traders can not set off losses from such transfers against any other income. In a surprising move, the Minister also proposed taxing gifts in the form of digital assets. The authorities will tax all such gifts in the hands of the recipient.
The Government also confirmed plans to launch its digital currency, the Digital Rupee.
In Sept. 2021, CoinChapter had covered the plans of the Indian Finance Ministry to levy taxes on cryptocurrency gains and foreign crypto exchanges.
The 30% tax slab is the highest in India.
A victory or a major blow to the cryptocurrency industry?
In 2019, a government panel recommended a jail term of up to 10 years for people who deal in cryptocurrencies. The Reserve Bank of India (RBI) had also repeatedly called for a total ban on cryptocurrency.
The development — from a 10-year jail term to 30% tax — is undoubtedly progressive. However, while the move comes as a victory, the high tax rate is alarming. Moreover, the provision to impose an additional 1% TDS (Tax Deducted at Source) makes matters only worse.
It is unclear what steps the Government will take to impose the new tax system. However, foreign exchanges will need to adapt to continue operating in India.
The decision of the Finance Ministry may also result in Indian crypto whales shifting to countries with more favorable taxation.
Indian Cryptocurrency Exchanges welcome the move
Crypto investors in India cannot get over the ludicrous high tax. Citizens have been accusing the Government of double standards. The Finance Ministry wants the Government to benefit from profits while offering no resolve during trading losses. Meanwhile, creating difficult conditions for cryptocurrency trade comes as an attempt to help popularize RBI’s digital Rupee.
As far as cryptocurrency exchanges are concerned, things look great. Major exchanges have welcomed the budget. After all, who cares about the high tax when you just got saved from going out of business, right?
“Crypto was in the shadows for a long time. Not anymore. This legitimises the whole industry and sends a positive signal about building in India,”Ashish Singhal, founder, and CEO of crypto exchange CoinSwitch Kuber said.
Nischal Shetty, chief executive of the Indian cryptocurrency exchange, WazirX, also welcomed the development. He even went as far as calling it “a very positive step forward for the crypto ecosystem in India.”
Sumit Gupta, CEO of CoinDCX, also welcomed the announcement calling it a step in the right direction.
“The budget is forward-looking and inspirational. It has touched key points that’ll help us create modern, powerful, digital, and sustained growth. We welcome the budget and congratulate the Finance Minister @nsitharaman for a futuristic budget,”Gupta announced.
Sathvik Vishwanath, CEO, and Co-Founder of Unocoin, hailed the upcoming launch of Digital Rupee on the blockchain.
“Digital rupee, using blockchain, to be launched by RBI in 2023. This is great news and helps people to understand cryptocurrencies and blockchains in a better way,”he said.
Are cryptocurrencies now legal, the opposition wonders?
Major Indian and international media houses have hailed the Finance Minister’s announcement as a sign of crypto legalization.
After all, you can’t tax an activity until you make engaging in it legal.
However, things are not as clear by the looks of it. The Indian National Congress, which sits in the opposition benches in the Parliament, has demanded clarification. The Government has not tabled any Cryptocurrency bill, and the Parliament has not passed the same. Without a law, how will the Government impose regulations?
General Secretary of the party Randeep Singh Surjewala asked the finance minister whether cryptocurrency has been made legal in India.
“And Ms. Finance Minister, pl do tell the Nation – Is Cryptocurrency now legal, without bringing the CryptoCurrency Bill, as you tax the cryptocurrency?”Surjewala asked.
In a single blow, the Finance Ministry has cast dark clouds on the future of cryptos in India. We will have to wait to see what comes out of the decision once the dust settles. However, it has generated mixed feelings among the cryptocurrency community so far.