After years of debate, a temporary ban by the Central Bank, a Supreme Court ruling and rumors of a ban by the Parliament, India has finally moved to officially classify cryptos as digital assets.
The new Finance Bill 2022 includes a new scheme for the taxation of crypto at a discriminatory rate of 30% regardless of whether it’s capital gains or income.
“No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income,” said India’s Finance Minister Nirmala Sitharaman.
Losses in crypto can of course still be set off gains in crypto, but not against other sources of income.
Stocks are to be taxed at 15% in India, while ordinary income of circa $1,300 a month or more is also taxed at just 15%.
Indicating crypto has been singled out for harsh discriminatory treatment, making India uncompetitive for crypto businesses.
The legalization of crypto however removes any uncertainty that business have experienced in the past four years, with Lakshika Kothari, Vice President at the crosschain liquidity Router Protocol, stating:
“Excited to see our finance minister Nirmala Sitharaman talking about gains from crypto income. This is a historic step in the direction of legitimizing crypto in India.
If we continue this progress, India has shot at becoming the center of gravity of the Web3 ecosystem.”
Yet with this punishing tax rate, many businesses might set up off shore with it unclear why they decided against taking a technology-neutral approach as Europe and America has.
But, the tax rate may well be brought down with it to come into force next year on April 1st.
