• Sun. Aug 14th, 2022

Bitcoin users will pay 30% digital currency tax in India from April 1

ByHazel R. Lang

Mar 29, 2022

The Lok Sabha, also known as the Parliament of India, passed the Finance Bill 2022-2023, which confirmed the 30% tax rate on all Virtual Digital Assets (VDAs) effective April 1 in addition to other regulations. There has been a lot of noise since Finance Minister Nirmala Sitharaman announced tax rules on digital currencies during the 2022-23 budget session in February. The recent announcement has only exacerbated this noise.

Here is the digital currency tax and proposed regulations:

On April 1, a tax rate of 30% plus surcharges will be levied on transactions related to the purchase/sale of digital assets similar to gambling and horse racing betting. However, any loss resulting from the transfer of digital assets will not be able to be compensated by the income resulting from the transfer of another virtual asset. When calculating the income from the transfer of digital assets, no deduction regarding an expense (other than the cost of acquisition) or an allowance will be allowed.

A 1% withholding tax (TDS) on payments to digital assets above INR 10,000 (or USD 131.30) per annum and taxation of digital currency donations in the hands of the recipient. The threshold limit for TDS will be INR 50,000 ($656.48) per year for those who are required to have their accounts audited under the IT Act. The TDS provision will come into effect from July 1, 2022.

VDAs will include all digital currencies and NFTs. A code, token or number that can be transferred, stored or exchanged electronically will be called a VDA.

The announcement hit many Indians hard as the government proposed to further tighten the terms of taxation of VDAs by not allowing investors to offset losses from one digital asset against profits from other digital assets. Regardless of what income bracket one is in, they will be responsible for paying a 30% tax rate from April 1. Disappointed Uddalak Das, a tech entrepreneur from India, told CoinGeek that people will pay capital taxes and earn nothing at the end of the day.

“And in addition, we have 1% TDS on each transaction! On the 10th transaction, people would spend more than 10% of their capital without earning anything. What does that mean? Das added.

Simultaneously, the government is working on a Digital Currency Bill, a piece of legislation to regulate digital currencies. However, it has not yet been released. The bill aims to “create a framework facilitating the creation of the official digital currency to be issued by the Reserve Bank of India”. The bill is expected to be tabled for discussion in May 2022.

As with any new rule of law, the approval of the “crypto tax” has also stirred a host of emotions in the digital currency community in India. Chief Operating Officer Varunjesh Bhambri appears unaffected by the move, saying it could impact larger investors more than retail investors. On the other hand, software architect Chirag Sharma looked frustrated and “quite” worried.

He said: “It looks like the government is strongly discouraging people from investing in digital currencies and exploring all the use cases for this technology. India should not miss this wonderful opportunity to adopt and eventually become a Web3 hotspot. It’s a crap!”

When asked if digital currency regulations could hamper BSV India’s growth in the future, Kapil Jain of the BSV Blockchain Association told CoinGeek that he doesn’t think so.

“I think the government is doing the right thing. The digital currency space is acting like the gambling and betting industry right now so they are taking the necessary steps to regulate the impulsive [speculative] side,” Jain said.

“A 30% tax rate on digital assets is a good thing,” he added.

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