Indian government disappoints its crypto industry by legislating crypto taxes. This happens despite the pleas from the industry for amendments. Many in the parliament have reacted strongly to the bill, complaining, the taxation may see the end of the industry.
What the crypto law states
The Indian government proposed a law for taxing virtual currencies in February this year. It sought to tax income from the transfer of any virtual assets at 30%. To track details of all crypto transactions, the finance ministry imposed a 1% tax deduction at source on payments made related to purchasing of virtual assets.
Finance Minister Nirmala Seetharaman, who introduced the bill, drove the same through the lower house with nominal suggestions from the upper house. While the upper house can only make suggestions, its function in finance legislation in India is minimal.
Sitharaman defended the move by saying that “there is no confusing signal” and that the ministry has “been very clear that consultations are going on as to whether we want to regulate it to some extent or really very much or totally ban it.” She also stated that the taxation on crypto is because people are deriving money from it, adding that TDS is “more for tracking, it is not an additional or new tax” and that “TDS can always be reconciled with the total tax to be paid to the government.”
In a clarification, made public on Monday, the Ministry of Finance pronounced its intention to tax each digital asset investment independently. This is a stark departure from the way the nation regulates transactions at the stock market, further punishing an industry that is already facing some of the world’s steepest tax rates. This implies that if one loses on Bitcoin the loss cannot be set off with profits in Ethereum.
The clarification, which also states that infrastructure costs for mining cryptocurrency will not be viewed as a cost of acquisition, arrives less than two weeks before the proposed crypto taxation law is set to go into effect from April 1.
Twitter exploded with resentment against the decision, with a tweet stating “Discouraging Crypto = Discouraging Innovation”.
The law evidently stifles the growth of a flourishing and promising industry but optimists think otherwise. Some have stated that is definitely better than an outright ban. Others have pointed out, this is how India has historically operated – taking it rather ‘slow’ and losing the opportunities to others. Some others view this as a thawing of relationship and hope for amendments to appear in the near future.