crypto tax: Crypto industry in wait and watch mode after clarification from govt

Synopsis

Market players believe that these stringent and ultra-strict rules will add more speed breakers to the already bumpy ride of the crypto industry.

Section 115BBH is a newly proposed section in the Income Tax Act that seeks to define and add a provision to tax gains from VDAs like cryptocurrencies.New Delhi: The latest clarification from the government over the calculation of profit and losses on virtual digital assets (VDAs) has hit the crypto players loud and hard. Their counter-responses say it all.

Market players believe that these stringent and ultra-strict rules will add more speed breakers to the already bumpy ride of the crypto industry.

Implementing a single tax for a single crypto rule will be a massive blow to the nascent crypto industry in India, said Shivam Thakral, CEO, BuyUcoin.
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“We have urged the regulators to take a nuanced approach towards crypto and discuss it with the industry stakeholders before arriving at a final decision,” said Thakral.

“Overall picture looks gloomy for the Indian crypto industry for now.”

Minister of State for Finance in Lok Sabha on Monday said that “as per the provisions of the proposed section 115BBH to the Income-tax Act 1961, loss from the transfer of VDA (Virtual Digital Assets) will not be allowed to be set off against the income arising from transfer of another VDA.”

Section 115BBH is a newly proposed section in the Income Tax Act that seeks to define and add a provision to tax gains from VDAs like cryptocurrencies. Taxes include 30 per cent on profits and 1 per cent TDS to be collected by exchanges.

Edul Patel, CEO and Co-founder of Mudrex, said that India has more than 100 million cryptocurrency users recording the highest number globally.

“These stricter laws, such as mandatory 1 per cent tax deduction at source on all crypto transactions, irrespective of profit or loss and 30 per cent taxation on profits gains, could deplete the crypto trade volume in the country,” he added.

Taxation laws may boost the morale of crypto enthusiasts, but the industry is currently lingering in the grey area. The government is likely to introduce the crypto bill soon.

However, market experts believe that it is too early to take a call over the impact of the government’s latest clarification, leading to the outflows from the crypto class.

Sathvik Vishwanath, Co-Founder and CEO, Unocoin, said that it is just the clarification provided about the calculation of profit and losses to access income tax. “This clarity was needed to plan the investments accordingly,” he added.

Amid the regulatory buzz and stringent rules across the globe, crypto investments are seeing massive outflows, thanks to pressure on the rich and institutional investors.

After the new laws, institutional and seasoned investors are under pressure with scepticism over taxation, said Patel from Mudrex. “While the classification of cryptos is the need of the hour, keeping a legal framework at the backdrop.”

High taxes and non-exemption to offset losses from other virtual assets is not so good, but the clarity would encourage a set of institutional investors to take crypto exposure for diversification in the next financial year, said Vishwanath.
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Updated: 03/22/2022 — 13:00