According to a story in the Economic Times, the Indian government is looking into levying additional taxes on interest collected on cryptocurrencies using decentralized financing (DeFi) services based outside of India.
The research stated that transactions where one party resides outside India or has not provided permanent account number (PAN Card) details are illegal.
The government could also apply an additional 5% equalization levy tax on foreign-owned e-commerce enterprises that serve Indian residents.
The Central Board of Direct Taxes consulted with tax specialists to determine how to implement these taxes.
The Indian government placed a flat 30% tax on all cryptocurrency gains beginning in April, causing trading volumes on exchanges to plummet. On July 1, a 1% factory-gate levy is payable.
Indian Ranked 6th on the Global DeFi Index in 2021
According to Chainalysis research, India was ranked 6th on the Global DeFi Index last year, based on on-chain DeFi value received, on-chain number of DeFi deposits, and on-chain retail DeFi value received.
The new tax rule, which demands a tax rate of up to 30% on earnings from crypto transactions, went into effect on April 1. As a result, major Indian cryptocurrency exchanges are experiencing a drop in trade volume.
Furthermore, the business has been damaged by the Unified Payment Interface (UPI) scandal, which began following Coinbase’s announcement that the exchange would handle UPI payments.
Meanwhile, India’s Finance Minister, Nirmala Sitharaman, has stated that the country will not make a hasty judgment on cryptocurrencies and other virtual digital assets but instead will make an informed choice.
She noted that while blockchain can contribute positively to the economy, it may also be misused and used for money laundering or terror financing.
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