After making some modifications to the scope and definition of VDAs, Virtual Digital Assets, the Indian government plans to produce a set of recommendations for effective tax administration of VDAs by 1st July. According to media sources, the CBDTm Central Board of Direct Taxes has received the task of developing the guideline.
“This is a developing discussion. We want to make sure that virtual digital assets cover all products introduced due to technological advancement. We may also exempt specific products,” said reports citing an unnamed Finance Ministry official.
No Relief in Crypto Tax Rates
According to the source, the Indian government is unlikely to reduce the 1% tax deduction at source (TDS) that applies to practically all digital asset transfers. It believes that the TDS will aid in tracing and tracking crypto traders who may be making profits but refuse to report them on their tax returns.
Some industry stakeholders, including Sumit Gupta, CEO of CoinSwitch Kuber, had asked the government to reduce the TDS in the range of 0.01% percent to 0.05%.
The 30% capital gains tax on income from crypto trades, including those of NFTs, announced in the Union Budget 2022-23 is likewise unlikely to be decreased. Apart from a few exceptions, such as hospitals that use blockchain technology, the Finance Ministry has no plans to grant exemptions.
Moreover, it is becoming more common to give digital assets as gifts during festivals and other special occasions. However, the source suggests that the new rules will almost certainly include provisions for taxation on such earnings.
No Update in Crypto Regulation
The government has established the crypto sector’s tax policy in the annual budget 2022-23. The officials have also outlined the basic elements for its execution in the upcoming guideline. But, there has been no official indication of the implementation of crypto regulation.
Reports suggest that after extensive meetings with industry stakeholders and foreign agencies such as the IMF and the World Bank, a top Finance Ministry official announced earlier this week that a consultation paper is “almost ready.”
According to Ajay Seth, the Finance Ministry’s Economic Affairs Secretary, officials will present the paper to the public for comments and feedback within six months.
Indian Finance Minister Nirmala Sitharaman pushed for worldwide crypto regulation during the IMF panel discussion and following public events in the US during the 2022 Spring Meeting in April, saying India will not make a hasty decision.
Hostile Crypto Environment
Many crypto enterprises have been compelled to migrate to a jurisdiction with friendlier legislation due to the Indian government’s regressive stance against crypto. Read more
The draconian crypto tax legislation in this year’s annual budget was rushed through without input from experts or stakeholders in the sector, driving many investors away from local exchanges.
Profits from cryptocurrency are now taxable at 30% under the new laws. On the other hand, unclaimed losses are not allowed to be set off or carried forward.
In yet another blow, the NPCI, National Payments Corporation of India, which supervises the UPI, Unified Payments Interface, recently issued an official statement explaining that no crypto exchanges are currently using UPI.
For laymen, UPI is a widely utilized instant real-time payment system that allows inter-bank transactions to be completed using a mobile phone.
When the remark was made, many domestic crypto businesses, most notably WazirX, were already offering UPI services via mobile wallets. Other exchanges serving the country’s crypto ecosystem’s UPI services were soon suspended.