The controversial Indian Finance Bill 2022 which was passed in the Lok Sabha less than a week ago, was approved by the Rajya Sabha and gained the President’s assent, efficiently paving the way for it to become a law. The Bill, thus, will come into effect from April 1.
The Finance Bill outlines the taxation rules regarding the cryptocurrency industry which includes the following provisions:
- All digital transfers and holdings will be taxed at 30%.
- Losses from transfer of one virtual digital asset cannot be offset against the profits from another.
- A 1% TDS tax at the source for each transaction will be levied.
The government is still trying to figure out how to tax crypto exchanges under GST, however currently they are taxed at 18 percent. GST officials have commented that cryptos, by nature, are similar to betting, gambling, casinos, lottery, and horse racing, activities on which 28 percent GST is levied.
Although clear regulations defining the status of cryptocurrency in the country have not been declared yet, the exorbitant taxation of the industry has invited the disapproval of several Indian crypto industry leaders as well as crypto users.
These rules could lead to liquidity crises on Indian exchanges, tax defaulters, gray markets and people trading without KYC/DEX.
Several Web3 founders and companies have also praised Ritesh Pandey, a member of Parliament for trying to explain the implications of the 1% TDS law to the House members.
All in all it’s a long and hard journey ahead for Indian crypto enthusiasts.
