New crypto taxes were effective from the 1st of April when T.V. Somanathan, the finance secretary of India declared that crypto will be taxed just as horse races or bets in India. In simple words, according to the new taxation laws, crypto trading will be dealt with just like gambling and in doing so, India becomes the first country to consider crypto-like gambling whereas other countries have seen and accepted crypto to be a new lead in technology.
The new Crypto tax law
Before we dive into our and other people’s opinions on the effect of these laws, let us first look at what these new laws are: –
- 30% flat tax on every profit – This means that you will have to pay around 30% tax on the profits that you’ll earn from trading crypto, moreover, if you cross the 50 lakhs bar then you will have to pay an additional surcharge on your tax. Apart from this, you will also have to pay a 4% Cess according to the bracket you fall under.
- 1% TDS on every trade/ transaction (July onwards) – If you are purchasing any crypto from a resident seller then you will have to pay after deducting 1% TDS which is your responsibility to submit to the government.
- No deductions – It must be noted that the deduction is allowed only in the purchase price and nothing else like brokerage, interest, royalty etc.
- No loss setoff – By this, it is meant that tax is only on the profits and if you incur any loss along with your profit, you cannot set off your taxes saying it balances my loss. Moreover, if you face a loss then the government shall not be liable for any correction of that loss.
It is to be understood that the meaning of transfer in the original document of these laws does not mean the same as the English word transfer. The government of India has defined transfer as the sale, exchange or giving up of your assets.
Moreover, there might be some changes or addition to these laws. At present how to file PIL in the high court and supreme court regarding these laws is still in process.
Effect of the new laws
The trades are showing a decline since the 1st of April, and many suspect the new tax laws to be the main reason behind this. however, there can be two possible reasons for the decline.
The first one would be the bill recommended by the FATF which recently got passed for all the G20 countries including India. This bill is to safeguard the interest of investors from frauds that happen due to a lack of records of transactions in the crypto market. This new bill makes it mandatory for not just the sender’s KYC but also the receivers. Moreover, any transaction above 1000 Euros needs to be notified.
Although it is a huge reason why we are seeing a decline, it is not the only reason. As suspected, new Indian tax laws are also affecting the market.
There are many like Suril Desai, the senior crypto lawyer who is unclear whether the drop is because of the new taxes or not. Moreover, even though ZebPay the most trusted crypto trading exchange revealed a drop of 59%, they still don’t feel the need to comment on it. While they face a dilemma to come to any conclusion many renowned people in the field of crypto and finance have shared their views on the new laws and their effect.
April 6 to April 10 trading volume drop by:
WazirX: 67%⬇️
CoinDCX: 62%⬇️
Zebpay: 72%⬇️
🇮🇳 Crypto exchanges are struggling.
— Kashif Raza (@simplykashif) April 12, 2022
Like Sathvik Vishwanath, the co-founder, and CEO of Unocoin tweeted how people earning less than 1,000,000 per year must pay a 30% fixed income tax on crypto, moreover 1% TDS to affect the liquidity providers and makers of the market. Thus, he concludes by saying that they both require a better ecosystem for crypto in India.
People earning less than 10L per year is affected by 30% fixed income tax on crypto. 1% TDS is affecting the market makers and liquidity providers. Both are needed for better crypto ecosystem in India.#reducecryptotax #faircryptotax Day-68 #IndiaWantsCrypto @Unocoin
— Sathvik Vishwanath (Unocoin) (@sathvikv) April 10, 2022
Siddhartha Sogani of Crebaco expressed how the Indian government needs to embrace the technology and accept crypto as it is because these new laws are harming the market. Also, he shares his concerns regarding the drop which he feels has created a new benchmark and doesn’t seem to be going up any time soon. He clarifies that the statements made by him are not just mere opinions, but facts and information compiled from different reliable resources.
Conclusion
Many still haven’t commented on the decline and its relationship with the new Indian tax laws. However, it cannot be ignored that these new taxes have a negative impact on the crypto trading, especially in India, may it be the fear or the amount that the traders must pay as tax or the disappointment of no security over the losses that may be incurred.