- February kicked off with India’s government announcing a 30% tax on all ‘virtual digital asset’ transactions after March 31.
- The country’s central bank is working on the digital rupee, which may or may be based on the blockchain, with a deadline of March 2023.
- Here’s everything that has happened in India’s crypto policy space in February, so far.
It’s been a year of waiting for India to officially present new legislation around crypto law with bare minimum movement public discussion. However, this week saw a flurry of announcements from the government, the Reserve Bank of India (RBI) and the Finance Ministry on what the future could possibly hold.
Here’s everything that’s happened around crypto policy in India just in the month of February, so far:
A 30% tax on cryptocurrencies
February kicked off with Finance Minister Nirmala Sitharaman announcing that all ‘virtual digital assets’ will be taxed at 30% on a ‘gross annual basis’. This includes any gifts, non-fungible tokens (NFTs) and, of course, cryptocurrencies.
The industry at large has welcomed the move since it gives a nascent sense of legitimacy to the crypto space. However, there is some that worry that a tax as high as 30% — the same rate that gambling activity is subjected to — may discourage traders from putting their money in the crypto market. Albeit it’s good news for the stock markets, with proponents being hopeful that the tax will push traders back to trading shares.
There are also a number of questions left unanswered around this law. For instance, gains can’t be set off against other income. Traders and accountants are confused whether this means income other than cryptocurrency, or can transactions not be set off against each other even between Bitcoin, Ethereum and others.
A 1% tax deducted at source (TDS) for every cryptocurrency transaction
Where there’s tax, there are people trying to avoid it. That’s one of the reasons that Sitharaman also introduced a 1% TDS on the buying, selling or any exchange of virtual digital assets. The rate’s been kept low so there’s no apprehension of added cost. However, the underlying reason for this is to get a full list of people who are engaging in transactions.
The practice isn’t uncommon — the same applies to e-commerce as well. It’s just a simple way for the government to know who is the seller, and who is the buyer. And, if the tax records don’t match up, they can ask questions based on this information.