Wednesday, July 24, 2024

30% crypto tax becomes law in India following Finance Bill approval

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30% crypto tax becomes law in India following Finance Bill approval

The Indian Finance Bill 2022 with new 30% crypto tax rules was approved by the Rajya Sabha, the upper house of the Indian parliament, to make it a law today that will come into effect starting on April 1.

The approval of the bill by the upper house of the parliament comes within a week of the lower house (Lok Sabha) approval.

The Finance Bill was introduced during the budget session 2022-23 of the parliament in January. The Finance Bill amended tax rules to impose a 30% crypto tax on digital asset holdings and transfers. Apart from that, traders cannot offset their losses against profits and each trading pair will be considered independently for the tax deduction.

If 30% tax was not regressive enough, the government also imposed a 1% tax deduction at source (TDS) on each trade, claiming it would help them track the movement of funds. However, exchange operators have warned that the 1% TDS would dry up liquidity.

Related: Taxman: India’s new tax policies could prove fatal for crypto industry

The infamous bill has been scrutinized by various experts, traders and exchange operators alike. However, the government decided to carry forward with its regressive approach without taking input from the stakeholders of the crypto ecosystem.

Another reason for outrage from the crypto community is the fact that the new crypto tax has been heavily inspired by countries’ gambling and horse betting tax rules. This signifies that the Indian government likens the crypto market to gambling.

The new crypto tax policy in India was finalized and approved within two months, while the Finance Ministry is yet to offer a regulatory framework around the nascent market despite years of assurance. Many crypto entrepreneurs in the country believe it would lead to a brain drain of talent and traders would eventually turn to decentralized exchanges and foreign platforms to conduct their crypto trade.