On the 28th and 29th of June, India’s federal and state finance ministers will meet in a panel to consider whether a new tax on cryptocurrency transactions should be implemented.
On June 28-29, India’s Federal and Finance Ministers will join a panel to discuss whether to charge an additional 28% tax on cryptocurrency transactions.
The proposed tax will be enforced in addition to the existing 30% crypto income tax.
According to reports, the panel would be unable to establish a rate during the two-day meeting. It is certain, though, that they will negotiate a rate in the highest tax bracket of 28%.
The crypto income tax of 30% went into effect in February 2022. Nirmala Sitharman, India’s finance minister, welcomed the tax measure 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 of the higher tax rate, crypto trade volume fell by 30%. The tax rate has also prompted big exchanges such as Coinbase and FTX to consider exiting the Indian market entirely.
However, Indian authorities did not believe that the 30% income tax was sufficient. A few months after the tax was implemented, India’s former finance minister stated that crypto is similar to gambling and that additional taxation is required to prevent individuals from participating in crypto.
He pushed the present administration to raise the tax rate to 40 or 50%, saying:
“There is no advantage of cryptocurrency for this country. I request the youth of this nation to not go towards cryptocurrency.”
Profits earned through centralized exchange platforms were taxed at a rate of 30%. To evade the high taxes, many Indians went to DeFi initiatives, which were exempt from the crypto income tax.
However, the Indian government recognized the shift in investor behavior and took additional protections.
In May 2022, it was discovered that India’s Central Board of Direct Taxes (CBDT) has been exploring into ways to implement an additional 20% levy on revenue made through DeFi.
The 28% tax rate that the council will debate next week was first proposed in May 2022 by India’s Goods and Service Tax Council (GST).
The GST classified cryptocurrency as gaming, betting, and lottery. The GST established a legal committee to classify the scope of crypto among these activities and suggest an appropriate tax rate.
To prevent Indians from using cryptocurrency, the committee in issue proposed a 28% higher tax rate on crypto transactions.
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