Indian tax representatives highlighted that crypto winnings are like lottery prizes.
India’s position regarding digital assets has been contradictory and highly criticized. In February, India’s Finance Minister Nirmala Sitharaman spoke about a 30% tax on every income resulting from financial operations linked to virtual digital assets. To reject this procedure, 100,000 people signed a petition on Change.org, in which they asked for a reduction of such policy.
Although this high tax didn’t get applied, the people’s request does not seem to be under consideration either.
According to the Press Trust of India news agency, the government is looking for ways to tax the total value of the transaction, including cryptocurrencies under the Goods and Services Tax (GST). Currently, crypto services brought by trading exchanges got labeled as financial services, they levy 18% GST on the services they give to users, but this action could face a change.
According to GST officials, crypto-assets are similar to winnings from a lottery, casino, gambling, or betting, which implement 31.20% GST (28% tax plus fee and surcharges). Inversely, the current rate for taxes marked on stock investments arrives from 0 to 15%, and these percentages depend on whether it got labeled as business income or a short-term capital income.
More Taxes are about to Come
The government highlighted all crypto profits made in the nation due to taxation at a flat rate of 30%. In addition, the government also ordered a 1% tax deducted at source on every crypto transaction, regardless of gains or losses.
According to analysts, this TDS would serve to restrain speculative trading and could consume crypto trading’s volume in India once it takes effect in July. This measure could be helpful for India to obtain at least $100 million in additional revenue.
These figures go according to calculations made by the founder of the Indian cryptocurrency platform WazirX, Nischal Shetty, who explained the whole through a Twitter thread.
The founder explained that India obtained at least USD$100bn in trading volume last year. This trade would be millions of people combined 1% TDS = USD$1bn But most of these TDS would have to be refunded as billing is NOT a gain Calculation below:
Indians’ crypto assets will be around $3 billion. If there is an assumption of a 10% net gain overall, the total revenue for Indians will circle $300 million. At 30%, that’s $100 million of income taxes payable, which means the Indian government would have to reimburse at least $900 million in TDS each year.
By blocking this $900 million, the government would break traders and prevent them from carrying out transactions due to lack of capital. Effectively, this would drastically reduce the profit potential.
Shetty’s Proposal Focuses on Reducing the TDS to 0.1%
This reduction would represent at least $100 million in TDS. That amount is the income tax generated from our previous calculations. Traders are not much affected; they can continue trading and make more profit.
According to BrokerChooser, a broker comparative network, India currently counts on at least 100 million crypto users, the world’s highest group of crypto users.
In addition to cryptocurrency trading, the government considered cryptocurrency mining profits as goods or services. Furthermore, the center even wishes crypto trading to happen on foreign platforms under GST.
By: Jenson Nuñez
