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India will consider 28% additional tax on crypto sales next week

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Federal Minister and Finance Minister of India join panel on June 28-29 to decide whether to introduce an additional tax of 28% on cryptocurrency transactions.

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The tax in question will be introduced in addition to the already existing 30% income tax on cryptocurrency.

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It is reported that the commission will not be able to finalize the rate during the two-day meeting. However, for sure they will discuss the rate at the highest tax rate of 28%.

Not enough income tax

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A 30% tax on cryptocurrency profits came into effect in February 2022. Indian Finance Minister Nirmala Sitarman called the tax law another step towards the positive regulation of cryptocurrencies.

Sitarman said:

“Any income from the transfer of any virtual digital asset is taxed at a rate of 30%. No deduction for any expenses or benefits shall be allowed in the calculation of such income, except for the acquisition cost.”

In the months following the introduction of the new tax rate, crypto trading volume dropped by 30%. The tax rate has also pushed major exchanges such as Coinbase and FTX to consider exiting the Indian market entirely.

However, the Indian authorities felt that a 30% income tax was not enough. A few months after the introduction of the tax, the former finance minister of India issued a statement that cryptocurrencies are like gambling and taxation needs to be increased to discourage people from participating in cryptocurrencies.

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

“For this country, there is no advantage of cryptocurrency. I ask the youth of this country not to switch to cryptocurrency.”

Incoming additional taxes

In addition to the 30% tax on cryptocurrency profits, the Government of India intends to apply two additional taxes to the cryptocurrency industry.

DeFi

A tax rate of 30% was applied to profits earned through centralized exchanges. To avoid high taxes, many Indians have turned to DeFi projects that are not subject to tax on cryptocurrency profits.

However, the Indian government has recognized the change in investor behavior and has taken additional precautions.

In May 2022, it was reported that India’s Central Board of Direct Taxes (CBDT) was looking for ways to impose an additional 20% tax on income generated through DeFi.

Transactions

The 28% tax rate, which the council will discuss next week, was first proposed by the Indian Council on Goods and Services Taxes (GST) also in May 2022.

GST equates cryptocurrency with gambling, betting and lotteries. GST has set up a legal committee to classify the scope of cryptocurrencies among these activities and propose an appropriate tax rate.

The committee in question mentioned the possibility of introducing an additional tax rate of 28% on crypto transactions to discourage Indians from using crypto.





Credit : cryptoslate.com

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