Barely a week before the Indian crypto tax policy is set to go into full effect, things have suddenly taken a more complicated turn. As earlier reported by BinBits, the new tax laws do not really offer the much needed regulatory clarity. At least, not as much as expected. However, a new parliamentary note intended to answer questions about the new laws on virtual digital asset (VDA), has brought even more confusion.
Indian Crypto Tax Policy Explained
Per the parliamentary note, a trader basically cannot offset the losses on a particular coin, with gains from another. That is, the Indian government would be treating each crypto trading pair transaction separately. In other words, a trader’s loss is his or hers, while his gains is also the government’s.
For clarification purposes, say a trader invests Rs. 100 into Bitcoin (BTC) and another Rs. 100 into Ether (ETH). This makes a total investment of Rs. 200. Now, assuming that the trader makes an extra Rs. 100 gain on BTC but lose their entire investment on ETH. Effectively, the government is saying that the trader must pay 30% from the Rs. 100 profit on BTC. Meaning that the trader is left with Rs. 170.
Meanwhile, the explanation has since raised concerns, with prominent crypto enthusiasts criticizing the latest clarification from the government.
Treating profits and losses of each market pair separately will discourage crypto participation and throttle the industry’s growth. It’s very unfortunate, and we urge the government to reconsider this.
Crypto entrepreneur Naimish Sanghvi has also advised traders to sell everything they have before March 31, 2022. He then suggested that they start afresh from April 2022.
Any Hope For India’s Crypto Community ?
While India may be yet to finalize a regulatory framework for the crypto industry, it might be safe to say that some progress is being made at least. Just few months ago, there were rumors that an outright ban on crypto will happen in the country.
However, though the stringent Indian crypto tax policy is causing an outrage now, it still gives some form of legitimacy to the crypto industry. Recall that the finance ministry was clear on the fact that the crypto industry would only gain any legal status after the passing of the crypto bill.
Also, if anything else is to give hope, then it is what happened she the likes of Thailand and South Korea also proposed a similarly high crypto tax. Both policies ended up failing upon the government’s realization that it would stunt the growth of the globally-trending market. While Korea postponed its 20% crypto tax, Thailand exempted traders from paying 7% value-added tax on authorized exchanges.