Next week, India would recommend introducing a 28 percent tax to cryptocurrency sales.

1 min read

28% crypto tax

According to reports, the panel won’t be able to decide on a rate during the two-day meeting. They will undoubtedly talk about a rate in the top tax bracket of 28 percent, though.

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Federal and Finance Ministers of India will join a panel on 28-29 June to decide whether to implement an additional 28% tax on cryptocurrency transactions.

The tax in question will be implemented in addition to the 30% crypto income tax already in place.

According to reports, the panel won’t be able to decide on a rate during the two-day meeting. They will undoubtedly talk about a rate in the top tax bracket of 28 percent, though.

Income tax wasn’t enough

The 30% crypto income tax came into effect in February 2022. India’s finance minister Nirmala Sitharman described the tax law as another step toward positive crypto regulations.

Sitharman said:

“Any income from transfer of any virtual digital asset shall be taxed at the rate of 30%. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except cost of acquisition.”

Within a few months after the new tax rate, crypto trading volume dropped by 30%. The tax rate also pushed major exchanges like Coinbase and FTX to consider leaving the Indian market completely.

However, Indian authorities didn’t think the 30% taxation on income was enough. A few months after the tax implementation, India’s former finance minister came forward to say crypto is like gambling, and more taxation is needed to discourage people from participating in crypto.

He urged the current government to increase the tax rate to 40 or 50% and said:

“There is no advantage of cryptocurrency for this country. I request the youth of this nation to not go towards cryptocurrency.”

Incoming additional taxations

In addition to the 30% crypto income tax, the Indian government is looking to apply two additional taxes to the crypto industry.

DeFi

Profits generated by centralized trading platforms were subject to a tax rate of 30%. Many Indians flocked to DeFi initiatives, which were exempt from the crypto income tax, to dodge the high taxation.

The Indian government, however, became aware of the change in investor behavior and began to take additional security measures.

It was revealed in May 2022 that India’s Central Board of Direct Taxes (CBDT) has been looking for ways to introduce an additional 20% taxation on income earned through DeFi.

Transactions

The 28% tax rate the council will discuss next week was first proposed by India’s Goods and Service Tax Council (GST) also in May 2022.

The GST considered crypto the same as gambling, betting, and lottery. The GST set up a law committee to classify crypto’s scope among these activities and propose an appropriate tax rate.

The committee in question mentioned the possibility of going with the 28% additional tax rate for crypto transactions to discourage Indians from crypto.

 

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