In early February, Cryptheory reported that the government of the world’s second most populous nation, India, had announced that it intended to tax income earned from cryptocurrencies by 30%.
Today, March 25th, the country’s Parliament approved the tax proposed by India’s Minister of Finance, Nirmala Sitharaman. Taxation takes effect within a week, starting on April 1st.
In addition, Indians will also have to pay a 1% withholding tax (TDS) and taxes on cryptocurrency gifts. The TDS goes into effect on July 1st.
Cryptocurrency tax in India
Overall, as might be expected, the cryptocurrency industry reacted negatively to the announcement. Likewise, several members of parliament opposed the new legislation. They warned that the measures could “kill” the cryptocurrency industry in the country.
On Twitter, the community began using the hashtags #reducecryptotax and #noTDS to speak out against the measure.
Still, they pointed to the lack of clarity about the definition of cryptocurrencies in the project. In response, according to CoinDesk, Sitharaman said that “there are no mixed signals”:
“We’ve been very clear that consultations are ongoing on whether we want to regulate it to a certain extent or really a lot or ban it entirely.”
The minister further said that the government is taxing cryptocurrencies because people are making money from it. Furthermore, he informed that the TDS works as a tracking strategy and that it is not an additional or new tax.
But for Ritesh Pandey, leader of the Bahujan Samaj party, the 1% tax deducted from the source does interfere with business:
“What the finance minister has done in introducing this 1% TDS is to make it difficult for the way business is done,” he said.
Same taxation of gambling
Even before the proposal was passed, lower house member of parliament Pinaki Misra had argued that the new rules would put cryptocurrencies on the same shelf as gambling. According to him, this shows that the government considers cryptocurrency trading to be a “sinful activity”.
However, there were those who saw the measure with good eyes. Global exchange OKX, for example, pointed out that the taxation shows recognition of digital assets:
“A tax on certain assets indicates that those assets are recognized as a tradable asset class by the regulator. This gives the industry much more clarity on the legal status of cryptocurrency and its derived income. So it is good news for the industry in India as it relates to building a more regulated operating environment for cryptocurrencies,” said Lennix Lai, Director of OKX.