The Minister of State (MoS) for Finance in the Government of India, Pankaj Chaudhary clarified on Monday that Indian government has tightened norms for crypto by disallowing losses incurred in a particular digital asset to be set off against income from another version of a crypto holding.
To understand this, suppose you have invested Rs.100,000 each on Bitcoin and Litecoin. But over a period, you gain Rs 50000 in Bitcoin but make a loss of Rs 30000 on Litecoin, then in that case also your taxable income from crypto assets will be Rs 50,000 instead of 20,000 (50000- 30000).
According to a news report, the minister further added that the government won’t allow tax breaks on infrastructure cost. The cost of mining new crypto currency will not be treated as a cost of acquisition.
This statement by the minister is another disappointment for the crypto industry in India. The first impediment was laid recently in the form of 30% tax on income from this sector in the budget presented last month. The crypto asset tax regime in India will begin from April 1, 2022 with 1% TDS on payments towards virtual currencies beyond Rs 10,000 in a year from July 1,2022 onwards. The threshold limit for TDS would be Rs 50,000 a year.
The government not only in India but through out world are still unconvinced about the future of crypto money. The crypto economy has seen a manifold rise in the past few years in terms of trading volumes. The government is quite apprehensive about the use of the digital platform which may be used for various shady activities.
Maneet Pal Singh, Partner, I.P. Pasricha & Co. remarked, “It means that losses booked in one class of asset (like bitcoin) cannot be set off against income from other class of asset (like etherium). Investors will have to treat each virtual digital asset separately for the purpose of taxation. This is discouraging for the crypto industry and for the investors as well.”
“Treating profits and losses of each market pair separately will discourage crypto participation and throttle the industry’s growth. It’s very unfortunate, and we urge the government to reconsider this,” says Nishcal Shetty, co-founder and chief executive officer of Binance-owned WazirX.
“Every VDA is considered to be a separate asset which will have its profit or loss booked independently. This could have been done to prevent unaccounted VDA swaps. Once CBDCs are implemented, the same is expected to ease out since on-chain records of profit/loss will be available for taxation purpose,” noted Amit Nayak, cofounder and CEO of Sahicoin.
The crypto market players are unhappy with the move as it may result in investors movement from India to other nations where they can find more relaxation in the rules.
However, the above statement of the Minister is not a surprise statement. In fact, it is in line with his earlier statement made in Parliament that the Government of India “will take all measures to eliminate the use of crypto-assets in financing illegal activities or as a part of payment system.”
