India’s proposed crypto tax law will take effect on April 1 this year.
Ashish Singhal, co-founder and CEO of India’s largest crypto exchange CoinSwitch Kuber, described the country’s crypto tax law as “a step backwards.”
Singhal expressed his disappointment on Monday after authorities issued clarifying guidance about the crypto tax rules that come into force on April 1, 2022.
India announced its crypto tax framework in February, imposing a 30% tax on any transfer of digital assets. In addition, a 1% deduction at source (TDS) will apply to all crypto payments.
While the crypto community had anticipated a high tax rate, many welcomed the government’s formal recognition of cryptocurrencies as an asset class. However, on Monday most crypto investors were surprised by a clarification notice from the Finance Ministry.
The ministry said India will tax each crypto investment separately, reiterating that gains from one investment cannot be used to offset losses from another. It also clarified that infrastructure costs related to crypto mining will not be considered acquisition costs.
This is “harmful” to crypto investors
Coin Crunch India, a crypto news platform, summed up the industry’s frustration in a post on Twitter.
https://twitter.com/ThatNaimish/status/1505833298982961155
“This is damaging to India’s crypto industry and to the millions of people who have invested in this emerging asset class,” the CEO of CoinSwitch said in response to the Finance Bill 2022.
He added that the country has “taken a step backward,” referring to the February Budget Bill that had earlier “recognized virtual digital assets (VDAs) as an emerging asset class.”
Singhal said he expected regulators to move progressively toward rules that make crypto “on par with other asset classes.”
He also warned that such regressive provisions, if applied to equity markets, would certainly harm retail investors — and that a similar outcome is possible for the growing crypto investor community.
“We are concerned that the lack of provisions to offset losses will drive users away from compliant, KYC-verified exchanges and platforms toward opaque peer-to-peer underground markets, which would defeat the purpose of taxation,” he said.