Less than seven days to implement the updated tax laws, confusion reigns over India’s crypto tax policies. A parliamentary addendum to questions regarding the crypto tax policy states that crypto traders can’t compensate for losses on one digital asset by making a profit from another one.
With the updated policy set to become effective by next Friday, many crypto industry analysts opined that this updated information doesn’t bode well for crypto traders. According to this policy, traders are expected to treat the profit or loss from a crypto pair trading separately.
India’s Crypto Tax Policy Is Confusing
For clarification, suppose a trader makes a profit of $100 when trading $100 worth BTC but makes a loss of $100 when trading $100 worth of eth. Then, such a trader is expected to pay tax on the trade that made a profit before trading off the profit made from the BTC for the ETH. Nischal Shetty, founder of popular Indian crypto exchange, WazirX, opined that the tax policy is a huge discouragement for Indian crypto traders and suggests that the authorities reverse their decision fast.
He further said, “this updated crypto tax policy will stunt the industry’s nascent growth in our country as many crypto players will be discouraged from participating in the trading market. It’s quite unfortunate that the government is making this decision, and I suggest that it changes its stance before the law comes into effect by April 1.”
Besides an ‘unfair’ crypto trade tax policy, Indian crypto players have criticized the authorities for imposing a 1% tax deduction at source (TDS) per transaction, besides an’ unfair’ crypto trade tax policy. Crypto players, especially exchanges, opined that this 1% TDS would negatively affect the market’s liquidity.
A Strange Suggestion
Naimish Sanghvi, a crypto investor, gave a bit of strange advice via Twitter this morning. He advised traders to offset their losses with profits by March 31 and withdraw all their earnings within the same timeframe. Then, they can start all over again by April 1.
After several pledges for nearly four years, India will establish a tax policy for its crypto industry. Even at that, it is failing miserably. The finance ministry has clarified that crypto trading or investing remains illegal until the legislature passes the crypto bill. Hence, many Indian crypto players are waiting patiently for this law to legitimize crypto trading in the country.
A few Indian crypto players claim that the government’s nonchalant attitude about the crypto industry is evident. It had to modify its gambling/lottery tax policy and use it for the crypto industry.
Seems like, Idea for crypto tax policy came from here. pic.twitter.com/wuUaWQxU2f
— Aditya Singh (@CryptooAdy) March 16, 2022
Aditya Singh (an Indian crypto investor) was the first to make this assertion publicly known. He made the explanation via Twitter last week. Some nations like South Korea planned to implement a similar tax policy, but the government shut it down because they understood its negative ramifications on the growing crypto market.