Will India’s 30% Crypto Tax With No Offsets Spell Doom?

Will India’s 30% Crypto Tax With No Offsets Spell Doom?

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Will India's 30% Crypto Tax, 1% TDS With No Sets-off Spell Doom?


India’s crypto policy seems to provide no respite for investors. On 21st March, the Ministry of Finance [MoS] Pankaj Chaudhary made it clear that crypto investors will not be allowed to set off losses incurred from one cryptocurrency against the gains from another crypto asset. Chaudhary was responding to questions during the Lok Sabha session [lower house of the Parliament]. The written statement read,

“As per the provisions of the proposed section 115BBH to the Income-tax Act, 1961, loss from the transfer of virtual digital asset [VDA] will not be allowed to be set off against the income arising from transfer of another VDA.”

For instance, if an investor loses Rs 500 in Bitcoin and gained Rs 800 in Ethereum in two separate transactions, he/she would still be taxed at 30 percent [Rs 240] on Rs 800. In case the investor was allowed to set off his/her loss in Bitcoin against his gains in Ethereum, he/she would have been taxed on Rs 300.

The announcement was initially made by Finance Minister Nirmala Sitharaman in her budget speech as she proposed a 30 percent tax on capital gains from crypto assets with effect from April 1, 2022. . Sitharaman had also proposed a 1 percent tax deducted at source [TDS] on proceeds of all crypto transactions.

One can check out TronWeekly‘s report on the concerns raised by experts on the TDS structure.

India’s Crypto Advocates Laments On The Harsh Policies

Nischal Shetty, CEO, WazirX feels that ‘Treating profits and losses of each market pair separately will discourage crypto participation and throttle the industry’s growth.’ Terming the news as ‘very unfortunate’, the exec appealed for reconsideration.

“It’s a continued effort to isolate and disincentivize cryptocurrency-related activities in India. The prevention of offset between different cryptos will probably negatively impact many traders,” said Rohinton Sidhwa, Partner, Deloitte India.

Recently, sources revealed that the Indian Government is planning to bring cryptocurrency under the ambit of goods and services tax [GST]. An official wishing to remain anonymous said “If that happens, the tax rate could range from 0.1 to 1 percent. So the priority would be to classify the digital assets category first and then discuss its tax rate.”

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