India will consider 28% additional tax on crypto sales next week
FedÂerÂal and Finance MinÂisÂters of India will join a panÂel on 28–29 June to decide whether to impleÂment an addiÂtionÂal 28% tax on crypÂtocurÂrenÂcy transactions.
The tax in quesÂtion will be impleÂmentÂed in addiÂtion to the 30% crypÂto income tax already in place.
It has been said that the panÂel won’t be able to finalÂize a rate durÂing the two-day meetÂing, reportÂedÂly. HowÂevÂer, it is cerÂtain that they’ll disÂcuss a rate in the highÂest tax slab of 28%.
Income tax wasn’t enough
The 30% crypÂto income tax came into effect in FebÂruÂary 2022. India’s finance minÂisÂter NirÂmala SitharÂman described the tax law as anothÂer step toward posÂiÂtive crypÂto regulations.
SitharÂman said:
“Any income from transÂfer of any virÂtuÂal digÂiÂtal asset shall be taxed at the rate of 30%. No deducÂtion in respect of any expenÂdiÂture or allowance shall be allowed while comÂputÂing such income, except cost of acquisition.”
WithÂin a few months after the new tax rate, crypÂto tradÂing volÂume dropped by 30%. The tax rate also pushed major exchanges like CoinÂbase and FTX to conÂsidÂer leavÂing the IndiÂan marÂket completely.
HowÂevÂer, IndiÂan authorÂiÂties didn’t think the 30% taxÂaÂtion on income was enough. A few months after the tax impleÂmenÂtaÂtion, India’s forÂmer finance minÂisÂter came forÂward to say crypÂto is like gamÂbling, and more taxÂaÂtion is needÂed to disÂcourÂage peoÂple from parÂticÂiÂpatÂing in crypto.
He urged the curÂrent govÂernÂment to increase the tax rate to 40 or 50% and said:
“There is no advanÂtage of crypÂtocurÂrenÂcy for this counÂtry. I request the youth of this nation to not go towards cryptocurrency.”
Incoming additional taxations
In addiÂtion to the 30% crypÂto income tax, the IndiÂan govÂernÂment is lookÂing to apply two addiÂtionÂal taxÂes to the crypÂto industry.
DeFi
The 30% tax rate was applied to profÂits earned through cenÂtralÂized exchange platÂforms. To avoid the heavy taxÂaÂtion, many IndiÂans turned to DeFi projects, which were not withÂin the scope of the crypÂto income tax.
HowÂevÂer, the IndiÂan govÂernÂment realÂized the shift in investors’ behavÂiors and moved on to take extra precautions.
It was revealed in May 2022 that India’s CenÂtral Board of Direct TaxÂes (CBDT) has been lookÂing for ways to introÂduce an addiÂtionÂal 20% taxÂaÂtion on income earned through DeFi.
Transactions
The 28% tax rate the counÂcil will disÂcuss next week was first proÂposed by India’s Goods and SerÂvice Tax CounÂcil (GST) also in May 2022.
The GST conÂsidÂered crypÂto the same as gamÂbling, betÂting, and lotÂtery. The GST set up a law comÂmitÂtee to clasÂsiÂfy crypto’s scope among these activÂiÂties and proÂpose an approÂpriÂate tax rate.
The comÂmitÂtee in quesÂtion menÂtioned the posÂsiÂbilÂiÂty of going with the 28% addiÂtionÂal tax rate for crypÂto transÂacÂtions to disÂcourÂage IndiÂans from crypto.