The Indian Finance Bill 2022 with new 30% cryptocurrency taxation rules has been approved by the Rajya Sabha, the upper house of the Indian Parliament, and will become law today with effect from April 1st.
The approval of the bill by the upper house of parliament occurs within a week after the approval of the lower house (Lok Sabha).
The finance bill was introduced to the 2022-2023 budget session of Parliament in January. The Finance Law has amended tax rules to introduce a 30 percent tax on cryptocurrencies on holding and transferring digital assets. In addition, traders cannot offset their losses with profits and each trading pair will be treated separately for a tax deduction.
According to a new amendment proposed in the 2022 Finance Bill to the cryptocurrency tax sections. Loss cannot be set off against any profit. Similar to staking tax rules. #reducecryptotax — Aditya Singh (@CryptooAdy) March 25, 2022
If the 30 percent tax wasn’t regressive enough, the government also introduced a 1 percent withholding tax deduction (TDS) on every transaction, claiming it would help them track funds. However, exchange operators warned that 1% TDS would drain liquidity.
Related: Tax Officer: India’s new tax policy could prove fatal for the cryptocurrency industry
The infamous bill has been carefully scrutinized by various experts, traders and exchange operators. However, the government decided to continue its regressive approach without the participation of the stakeholders of the cryptocurrency ecosystem.
Another reason for the outrage from the crypto community is that the new tax on crypto was heavily inspired by national rules for taxing gambling and betting on horses. This means that the Indian government is comparing the cryptocurrency market to gambling.
“Buying/selling cryptocurrency assets in India is not illegal, but we have introduced a taxation that treats it as winning on the horse races…” – TV Somanathan (Indian Finance Minister). It has more to do with their opinion than just tax. #reducecryptotax #faircryptotax Day-53 #IndiaWantscryptocurrency @Unocoin — Sathvik Vishwanath (Unocoin) (@sathvikv) March 26, 2022
The new cryptocurrency tax policy in India was finalized and approved within two months, while the Ministry of Finance has not yet proposed a regulatory framework for the nascent market, despite years of assurances. Many cryptocurrency entrepreneurs in the country believe that this will lead to a talent drain and traders will eventually turn to decentralized exchanges and foreign platforms to conduct their cryptocurrency trading.