Let’s dive into more details
The plan of the Indian government to regulate the crypto industry was finally unveiled. Thankfully, it’s not the ban of all private cryptocurrencies many traders feared. However, Indian crypto holders are facing an unpleasant surprise – 30% crypto tax.
On Tuesday, Indian Finance Minister Nirmala Sitharaman presented the annual budget for the new fiscal year which begins in April. She paid special attention to the legal status of crypto assets in the country which has the highest number of crypto owners in the world.
Although there is no official data on the size of the Indian crypto market, industry estimates that the total crypto holdings of Indian crypto investors amount to around 400 billion rupees ($5.37 billion).
To begin with, the country does not plan to ban crypto ownership or payments using virtual assets like some other countries have before. Moreover, the Indian government is moving closer to making crypto and NFT legal tender. Firstly, India’s central bank has done some trials and will introduce a digital rupiah in the next financial year. Secondly, the government recognises the scope of virtual trading that involves its citizens and wants to legally include it in the national financial system so that there’s no uncertainty.
Therefore, income from the sale of virtual assets (including cryptocurrencies and NFTs) will be subject to taxation just like other common sources of income. All Indian citizens who receive profit from crypto trading and NFT sales will pay a tax of 30% on each deal. Sitharaman also proposed a 1% tax deduction on payments made related to purchase of virtual assets.
“There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” explained the Finance Minister.
Truly, in 2021, India’s largest cryptocurrency trading platform WazirX, recorded an annual trading volume of $43 billion worth of cryptocurrency, which was a “1,735%” growth compared to 2020.
To clarify further on taxation rules, Sitharaman added that losses from the transfer of digital assets cannot be set off against any other income. Gifts of virtual assets will also be subject to taxation. The recipients will pay crypto tax too, as the assets they get as a gift present a potential income source.
More detailed regulations regarding crypto-asset status in the country will be introduced soon, after some discussions with the industry stakeholders. So far, cryptocurrencies in India have still not been officially declared legal tender. Neither are there strict rules about the functioning of crypto exchanges in the country.
While some crypto holders condemn the new tax as «too high», others are optimistic about its meaning for further development of the crypto industry in India.