India's tax policies on income from digital asset

[Bttzed03]

Update (June 23, 2022): They could add another 28% tax on sale of goods and services (GST).
Also, title change.

The proposal by the Indian Finance Prime Minister as announced during the Budget 2022:

• 30% tax on all income/profit from sale/transfer of Digital Assets
• No deductions allowed in the tax computation except the cost of acquisition
• Losses are also non-deductible or cannot be used as an offset against other income
• 1% Tax Deducted at Source (If I understand correctly, it's similar to Withholding Tax)

If you're wondering why they used 'Digital Assets' instead of 'Currency', they do not recognized crypto as a currency. The PM said it only becomes a currency when it is issued by the Central Bank (CBDC) and anything outside it is an Asset.

What are your thoughts on this?

It's a double edge to me. We have the legalization aspect (after so many ban proposals) but the rate looks quite high especially when they lowered the personal income tax rates (for certain income brackets) and the Capital Gains Tax appears lower too. It seems like they really want to get the most from crypto retail traders and investors because they know that there is a strong demand and a large number of transactions.

https://timesofindia.indiatimes.com/business/india-business/30-tax-on-digital-assets-all-you-need-to-know/articleshow/89267925.cms

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[Poker Player]

High taxes as in this case motivate people to underreport sales in order to avoid paying them or otherwise circumvent the law. There are more than a few cases throughout history where lowering taxes has raised more money.

...especially when they lowered the personal income tax rates and the Capital Gains Tax appears lower too. It seems like they really want to get the most from crypto retail traders and investors because they know that there is a strong demand and a large number of transactions.

What governments like this one do is kill the goose that lays the golden eggs.

[jackg]

• 30% tax on all income/profit from sale/transfer of Digital Assets
• Losses are also non-deductible or cannot be used as an offset against other income

This seems like quite a harsh rule to expect to implement. It means speculators there won't be able to take as much of an advantage of the market in case something goes wrong - might make things like scalping and swing trading seem more risky.


I'm sure therell be many fancy ways the cost of acquisition thing can have exploitable loopholes too unless it's very specific in the legislation.

What governments like this one do is kill the goose that lays the golden eggs.

High taxes on innovators is a very good way to destroy innovation. Many countries have an "entrepreneurs' relief" for such a reason which normally reduces tax or spreads it out.

[Jawhead999]

They don't have any choice if the government want to legalize crypto and took insane fees, at least they're happier than the crypto is banned. Many people doesn't want to pay large fees, most probably they will do anything to avoid tax just like in few years before when crypto is banned in india... they will do anything to hold and trade crypto. IMO they need to make the tax is tiered and not fixed as long as someone made profit.

[boyptc]

It's like ban or taxation.

I guess people from there would be fine if they just impose the ban and just keep quiet keeping their digital assets from them. Since they're not even going to know who are the people that holds and has it.

IMO they need to make the tax is tiered and not fixed as long as someone made profit.

I agree, it should be like this. The higher profit, the higher taxation so that small traders and investors won't be hurt that much with this imposed taxation.

[Wind_FURY]

The solution is simple if you’re a Bitcoin HODLer. DON’T SELL, HODL.

OP, does India have the same rule that if you are HODLing your investment for more than one year, the profit is considered a “long-term gain”, and therefore the taxes are calculated at a lower rate than”short-term gains” of investments held less than one year?

[mindrust]

This is pretty hardcore. It is like they banned crypto without actually banning it.

If you're wondering why they used 'Digital Assets' instead of 'Currency', they do not recognized crypto as a currency. The PM said it only becomes a currency when it is issued by the Central Bank (CBDC) and anything outside it is an Asset.

What are your thoughts on this?

When it comes to what bitcoin really is though, I guess everybody is free to make his/her own definition because it is decentralized. Some people define it as a currency, some other say it is an asset, some people would even dare to say it is nothing but a scam...

Who cares  about what they say?

[Haunebu]

Just another stupid proposal which may/may not become the law. I have no idea why so many people take these proposals seriously even though they haven't been approved/rejected yet. Such people need to improve their brain-power.

The Indian government clearly gave up on banning cryptocurrencies directly and are trying to regulate them in this manner.

If this particular proposal actually ends up getting approved and legalised, I believe that Indian crypto traders will find a way to circumvent this issue just like they have done so many times in the past.

[ultrloa]

its just a proposal and provably many people who use bitcoin will protest against it since this plan made by their official can really hurt their pockets. Maybe this is their first step to discourage people to use crypto that's why this is pushed by certain official but hopefully this one will never pass so that people will not get affected to much on those possible implementation.

[Bttzed03]

its just a proposal and provably many people who use bitcoin will protest against it since this plan made by their official can really hurt their pockets. Maybe this is their first step to discourage people to use crypto that's why this is pushed by certain official but hopefully this one will never pass so that people will not get affected to much on those possible implementation.

I would not dismiss this as a mere proposal because it's their Finance Prime Minister who is already talking. I won't be surprised if it becomes a law by next month.

This is pretty hardcore. It is like they banned crypto without actually banning it.

Nailed it.

~
When it comes to what bitcoin really is though, I guess everybody is free to make his/her own definition because it is decentralized. Some people define it as a currency, some other say it is an asset, some people would even dare to say it is nothing but a scam...

Who cares  about what they say?

Yeah we have different view but I still find it important to make a clear distinction from their perspective.

The solution is simple if you’re a Bitcoin HODLer. DON’T SELL, HODL.

OP, does India have the same rule that if you are HODLing your investment for more than one year, the profit is considered a “long-term gain”, and therefore the taxes are calculated at a lower rate than”short-term gains” of investments held less than one year?

Based on what I read, it seems like they made theirs much simpler. Taxes can only be applied when you transfer or sell your crypto. Anyway, it won't be long before this proposal becomes a law. Let's wait for that to get more details.

It's like ban or taxation.

I guess people from there would be fine if they just impose the ban and just keep quiet keeping their digital assets from them. Since they're not even going to know who are the people that holds and has it.

They will probably find it hard to implement this tax law at the beginning but I bet they have the means to track those who previously used custodial/centralized platforms to trade.

IMO they need to make the tax is tiered and not fixed as long as someone made profit.

For now, it's 30% but who knows if there will be future amendments? Maybe the crypto community there could have some power to make suggestions in the near future.

~ I'm sure therell be many fancy ways the cost of acquisition thing can have exploitable loopholes too unless it's very specific in the legislation.

We'll have to wait and see the actual law when it's out.

[Leviathan.007]

If you're wondering why they used 'Digital Assets' instead of 'Currency', they do not recognized crypto as a currency. The PM said it only becomes a currency when it is issued by the Central Bank (CBDC) and anything outside it is an Asset.

Many other people believe in the same way and they think digital currency is not actually cryptocurrency including myself because the digital currency is not actually encrypted like cryptocurrency is decrypted and that's not centralized at all so I believe is the same way. Regarding the tax, I think there will be more countries trying to take tax from their people instead of selling products to the other countries because even during the time when they cannot trade to other countries they can still have income from the tax they take.

[takngantuk]

great step to legalize crypto, but I don't agree with 30%. isn't that too big?
If this policy is legalized, I think there will be a lot of people against it. because the percent of the tax is too high, and does not make sense if applied.  they should come up with a new better proposal and change the 30% to a reasonable numbers.

[boyptc]

It's like ban or taxation.

I guess people from there would be fine if they just impose the ban and just keep quiet keeping their digital assets from them. Since they're not even going to know who are the people that holds and has it.

They will probably find it hard to implement this tax law at the beginning but I bet they have the means to track those who previously used custodial/centralized platforms to trade.

Yes, those that have records already in centralized exchanges, they can ask those exchanges for the files and data of their countrymen that have used their platform.

That's the first step that they'll surely do if they want to get serious on tracking those just to have an idea who are these people that have at least owned or traded crypto and is likely still holding presently.

[Darker45]

When it comes to taxes, I think the best way to go is moderation. There was a proverb I encountered a long time ago referring to a string instrument which goes like, don’t tighten the string too much, it breaks; don’t loosen it too much as well; it doesn’t make a sound. This is also how taxation should be handled by governments. An unreasonably high tax will discourage businesses or investors or even honesty from their declarations while too low taxes will also limit government revenue. It will have to be moderate as not to shoo away people and companies to tax havens or force them to hide taxable income but also not deprive the country of what it deserves from the income of its people and companies.

[hugeblack]

It's a proposal, I thought it was a law?
Imposing taxes without a serious investment in how to track these currencies is considered useless and is specifically targeted at businesses that will try to accept bitcoin such as stores and others, but it is difficult to track traders, especially in a country like India.
It's also motivating users to buy and avoid selling.

In general, I hope it becomes a law to get rid of the topic of "India's ban of cryptocurrencies"

[Ozero]

It’s good that India still intends to legalize the circulation of cryptocurrency. But we should wait for the relevant law, because there have been various opinions about the fate of the cryptocurrency for a very long time and there was a lot of information about its possible ban in this country.
Of course, a 30 percent tax on profits from cryptocurrency activities is very large. Most likely, the Indian authorities want to reduce the desire and ability of citizens to engage in cryptocurrency in this way. But this may be a further field for struggle, now the main thing is that the cryptocurrency in India should be legalized.

[Bttzed03]

~ If this policy is legalized, I think there will be a lot of people against it. because the percent of the tax is too high, and does not make sense if applied.  they should come up with a new better proposal and change the 30% to a reasonable numbers.

People's reaction are mixed on this proposed tax digital asset income. Some are understandably angry while others are okay with it because it's still better than a ban. Those who agree said it's just the first step though which probably means they are waiting for the actual law and also plan to make proposals to reduce in the future. If passed, I think it will take a few years before amendments will be made.

[tyz]

Have already replied to a similar discussion on Reddit. Basically, this proposal is much better than a ban, which was on the table not too long ago. Therefore, the move away from a ban and the attempt to treat cryptocurrencies in terms of tax law is a big step forward. Whether the 30% tax is justified or not is subjective. I for example would be very happy with this tax rate on crypto income, because in my country I pay 40+ percent tax on crypto income

[gantez]

Whether the 30% tax is justified or not is subjective. I for example would be very happy with this tax rate on crypto income, because in my country I pay 40+ percent tax on crypto income

It is too high to tax an income that way and 40% is out of it. This means every income will go into tax and India is having a high cost of living there, the situation will not be a good one in that aspect. When income goes into tax it only increase the level of hardship in the people because the standard of living will also go higher.

[ultrloa]

~ If this policy is legalized, I think there will be a lot of people against it. because the percent of the tax is too high, and does not make sense if applied.  they should come up with a new better proposal and change the 30% to a reasonable numbers.

People's reaction are mixed on this proposed tax digital asset income. Some are understandably angry while others are okay with it because it's still better than a ban. Those who agree said it's just the first step though which probably means they are waiting for the actual law and also plan to make proposals to reduce in the future. If passed, I think it will take a few years before amendments will be made.

Yes because some think that its good recognition by the government since by putting tax on bitcoin it show that it has a chance to became legal on their country. But also at negative side its like discouraging their citizens to use since there's a huge tax will taken to them if they keep using this. Maybe the indian government grant this since they see a vast majority disagree on what action they do towards bitcoin and they just put that huge tax to eliminate it slowly.