India becomes global anomaly by taxing crypto earnings — even if you’ve made losses
Your NFT profile pictures got a bit more costly
How will the new tax scheme work?
The taxation part is more important for common cryptocurrency traders. Here’s what it means for you (for simplicity, I’m sticking to Indian rupees as the currency unit):
You will be taxed 30% on your cryptocurrency trading income, and there will be no offset for losses when it comes to other means of income, such as money earned from trading stocks.
If you buy Coin A and Coin B both at ₹100, and sell them for ₹200 and ₹50, you will have to pay ₹15 as tax (based on 30% rate). But if both your coins sell for ₹50 each, you can’t claim any losses.
This will expectedly drive people to invest cautiously and stay away from volatile tokens. The new rule will be effective from April 1, 2023 for the assessment year 2023-24.
The government will also levy a 1% Tax Deducted at Source (TDS) on all cryptocurrency and digital asset transactions, when aggregating transactions exceed ₹10,000 (and ₹50,000 in some circumstances) per payer.
If you deposit ₹7,000 in an exchange, and your trade volume goes above ₹10,000 in a financial year, you’ll be taxed 1% of the total amount. However, the limit resets for your wallet/account in another exchange.
We are expecting cryptocurrency exchanges to spell out the details of how this will workexactlyin the coming days, and we’ll update the story accordingly.
Challenges and future outlook
There’s still some uncertainty around how all of these transactions will be tracked and taxes calculated on the income. Plus, all cryptocurrency trading companies will have to implement the Know Your Customer (KYC) process in a way that government can trace the income of a person using different exchanges.
Nitin Sharma, the global blockchain lead at investment firm Antler, said there’s no clarity around how the government plans to regulate foreign exchanges such as Binance and Kraken. He added this new tax structure provides some legitimacy to the crypto ecosystem:
The biggest crypto exchanges in India, includingWazirX,CoinDCX, andCoinswitch Kuberhave reacted in a positive manner — mostly because there’s no fear of a blanket ban now.
In the global context, India’s crypto tax might offer a unique form of regulation. Some markets such asthe USandthe UKallow you to offset your crypto losses in overall capital tax gains. Mikel Ayala, chief growth officer at Atani, a multi-exchange cryptocurrency platform with tax reports, said most countries in the world have followed the traditional income tax structure and applied it to digital currencies:
The next steps for the government will involve bringing in regulation, and in a press conference today, Sitharaman saidauthorities are “collecting inputs” for it.
This will hopefully ensure there are noFyre Festival for cryptoprojects in India.
Story byIvan Mehta
Ivan covers Big Tech, India, policy, AI, security, platforms, and apps for TNW. That’s one heck of a mixed bag. He likes to say “Bleh.“Ivan covers Big Tech, India, policy, AI, security, platforms, and apps for TNW. That’s one heck of a mixed bag. He likes to say “Bleh.”
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