Sudden bomb dropped on Indian Crypto enthusiasts with the announcement of 30% flat tax
February 1st was not an insignificant day for Indian crypto investors, with India’s Finance Minister Nirmala Sitaraman making the announcement that crypto profits will be taxed at 30% at the yearly Budget presentation. Ever since then there is buzz about this.
Tweet of @CryptooIndia
Summary of the crypto Tax measures that India's Finance Minister Nirmala Sitaramam announced in the Budget presentation
For me of course, this was a shock because India has not made any crypto bill and looking at the crypto stance of the Indian Government, it did look like they might even make crypto illegal if that was possible.
So, even though no clear clarification has come about what the Government considers crypto to be, they declare that crypto profits would be subject to 30% tax!!
30% Flat Tax rate on all crypto profits - minute, small and big
Now, small crypto people like me who earn only a bit from platforms like HIVE should practically not be worried about taxes, but this budget announcement concerned all crypto hodlers including the small ones as all amounts of crypto profits would be subject to 30% flat tax even if your earnings in crypto does not amount to much.
Meaning 30% tax even if you don’t earn much income through crypto to fall in the tax paying category.
Tax on profits without deductions for expenses incurred
30% flat tax rate on crypto profits which will not take into account other expenses incurred, for ex - exchange fees, blockchain fees etc.
Although there will be a base deduction for the cost of acquisition of a crypto asset without accounting for expenses I have mentioned above. Acquisition here refers to the cost incurred in buying any crypto asset.
1% TDS charge aimed for tracking crypto traders
Furthermore, the Finance Minister introduced new complications for crypto traders as 1% TDS will be charged to help the Government track any crypto trader’s account.
Of course, this TDS charge amount will be adjusted when crypto traders file their taxes but even so in the short run this has implications on the revenues of Indian crypto investors which will affect their trading decisions.
Meme from tweet
Can not set off losses from crypto trading carrying it forward to the next financial year
Thankfully, this 30% tax is not on the crypto losses made, it’s only chargeable on profits of a crypto investor.
Again thankfully, crypto investors can adjust for losses made in crypto with their crypto profits in the same financial year.
However, they cannot carry forward any crypto losses made to the next financial year.
Take for example, your 1 lakh investment of BTC reduces to 50,000 Rs in one financial year. There will be no taxes on the loss made selling your BTC investment that year. However, next year you reinvest your Rs 50,000 in BTC and you make Rs 20,000 profit.
You will be charged 30% tax on this Rs 20,000, even though you made a loss of Rs 30,000 if you carried forward the loss you made in the BTC investment from last year.
Also one cannot adjust the loss they made in crypto with the profits they made from other asset investments.
Meme posted on Twitter account @memeypto
30% tax on Crypto transfers and Gifts
There is mention about taxing crypto gifts, crypto transfers. However, crypto transfers from your wallet to your wallet in another platform should be free. Crypto Gifts sent to blood relations should also be free.
Rest of crypto transfers and crypto gifts looks to be subject to this grand 30% tax again, as if crypto transfers are free in Blockchain anyway!! We all know the high transaction fees of transferring Bitcoin and Ethereum assets.
From Twitter
Of course, its so unfair that the Indian Government intends to impose harsh taxation measures for the Indian Crypto community
Majority of crypto investors have not made fortunes to pay 30% tax surely!!
Meme from some tweet with Indian Crypto community tweeting to #reducecryptotax and introduce #faircryptotax
This is what I understood about the current crypto tax provisions the Government proposes to make to the crypto industry.
The Indian Government probably feels that everyone in crypto has made a lot of money I guess, which is certainly not true, especially investors who have recently invested in crypto as the market has tumbled and bled a lot of late.
Those of us who may be still in profits because we invested in crypto a little earlier, won’t also finally make enough money in the crypto space because we have to account for deductions that will happen in transfer and exchange fees and then that 30% tax will eat away almost any other slight profit we managed to make.
Bitcoin Mining Businesses will close shop in India with this 30% tax measure
Crypto Businesses can function albeit less lucratively with this current crypto tax proposal. Bitcoin miners will find it difficult to be in profit because tax on their Bitcoin mining profit earnings will be computed without reducing expenses incurred for equipment, electricity, payment for employee salaries etc.
This will result in them moving offshore, maybe to places like even El Salvador, where taxes on capital gains made from Bitcoin profits is announced to be nill…Ha!!
Crypto required for people to benefit using Blockchain technology
Right now, the talk is that the Government of India is equating crypto to the likes of gambling and horse racing, that they are charging 30% tax to deter Indians from dealing with crypto. Unfortunately, this can curb Blockchain innovation, because we know crypto has valuable use cases in Blockchain be it in DEFI or using decentralised social media platforms like Hive etc.
Also, there are people whose whole means of earning is through engaging in Blockchain platforms like HIVE because of Covid job loss!!
Upsetting!!
Indian Crypto enthusiasts are glad that their Government is looking to regulate and not ban cryptos
Tweeter Tweet of @Cryptotvplus
Anyway on the hopeful side, people who still want to be in crypto because they believe in it can engage in crypto without fear of it getting banned as it certainly looks like Indian Government is looking to regulate crypto, they have just made a rough start.
Now banks need not fear servicing Indian crypto exchanges, so Indian crypto exchanges will not have the problem of not getting banking partners.
Online campaign on Twitter to #reducecryptotax
So, the Indian crypto community is campaigning to #reducecryptotax, with that tag trending a few days ago on twitter. #IndiaWantsCrypto tag was buzzing with cool memes showing that the Indian government is exploiting Indian crypto investors, taking all crypto investors earnings to enrich themselves.
Ha!! … Talk about the privilege of powerful entities like the governments!!
Online Petition to #reducecryptotax is circulating within the Indian crypto community
A petition made by Aditya Singh addressed to Indian Prime Minister Narendra Modi and Finance Minister Nirmala Sitaraman is in circulation already signed by more than 64,000 Indian crypto enthusiasts as at the time of writing this post.
Petition being signed by thousands of Indian crypto enthusiasts urging the Government to reduce crypto tax.
Let’s see what this petition tells the Prime Minister and Finance Minister of India to do -
- It asks for reasonable crypto taxes. Where taxes should be charged as it’s charged for assets like stocks, where tax is charged way more reasonably only on the capital gains made. Also the exemptions and reduction prevalent for those asset classes should be given to crypto assets.
- It asks to reduce TDS to 0.05% or adopt the model that’s used in stocks, as in stock market trading TDS seems to be not there.
- It explains that crypto is not merely a speculative asset. It is a utility token of a Blockchain, it should be treated as a legitimate asset class
- It asks to provide provision to carry forward crypto losses to the next financial year, so that those losses can be set off against next financial year's crypto earnings.
*It says that cost of Acquisition should consider inclusion of usual expenses that one incurs when buying crypto assets, i.e, Exchange fees, Blockchain network fees, Interest payment, Royalty payments on NFTs etc.
At the end, the Indian crypto community hopes that reason would prevail and that the Government imposes crypto taxes reasonably(#faircryptotax) and not on small profits small cute investors like me make. HA!!
I was enlighted on this crypto tax topic through these sources by Indian Crypto educators-:
Crypto India's Youtube Podcast
PUSHPENDRA SINGH DIGITAL's youtube podcast
Thank you for reading. Happy Weekend!!