India’s proposal of crypto tax shows signs of progression

The use of cryptocurrency within India could be about to undergo a major change for residents within the country, as it has been announced that a new tax could come into effect for those that continue to use digital assets.

Indeed, the use of these assets has become increasingly popular amongst many of the country’s citizens for a variety of different reasons. Many have looked at using crypto as a method of investment that allows them to retain some wealth compared to the Indian Rupee. 

Others have looked at using them when finding an Indian crypto casino that they can use to enjoy gambling activities; especially as gambling appears to be on the rise. Citizens have been able to bypass certain restrictions that have been imposed by the laws of the country, whilst also being able to enjoy a number of benefits that simply can not be ascertained when using traditional fiat currency, such as increased levels of anonymity, security, and an easier transaction process that allows them to get their hands on their money a lot quicker without having to incur certain charges.

India makes taxation proposals

However, it would seem that whilst India has started to make proposals that could see crypto become legal tender in the future, holders could be in for a hefty taxation rate should the proposals in the world’s second-largest internet market be made.

It has been proposed that any income from the transfer of virtual assets will be taxed at a rate of 30%, whilst the nation’s finance minister Nirmala Sitharaman also proposed that a 1% tax deduction at the source on payments made related to the purchase of virtual assets should also be implemented.

“No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital assets cannot be set off against any other income,” she said in one of New Delhi’s most remarkable tech and business-focused federal budgets. “Gift of virtual digital assets is also proposed to be taxed at the hand of the recipient.”

The growing rate of interest and adoption to have already been experienced

As already highlighted, cryptocurrency – as well as NFTs – have already experienced a surge in interest and popularity within the country, with it having been claimed that yearly trading volume on the Binance-owned platform WazirX having exceeded $43 billion in 2021, at a “1,735%” growth from 2020.

Naturally, the growing rate of adoption has seen a number of startups that have looked to exploit the market space and be as innovative as possible, although with many of them being as aggressive as possible, it would appear there has been some concern which has perhaps led to the proposals of a tax being implemented to be made.

Andreessen Horowitz, who made the maiden investment in India last year when she backed cryptocurrency exchange CoinSwitch Kuber stated: “The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime”.

New digital currency to being considered to be introduced

The proposal of a new tax is not the only thing that could be implemented, with India’s Central Bank also looking to introduce a new digital currency in the next financial year. The nation has already tested a CBDC for several months and has examined the impact it has had, with it thought to have a big boost to the digital economy, whilst it will also be treated by the Central Bank as banknotes.

Although the move appears to be rather positive, there does still seem to be a lot of confusion about the legal status of crypto moving forward. However, it does seem that the move is deemed favorable and one that can help the market to boom, especially as India appears to be taking a progressive stance.