On June 28 and 29, a panel that includes India’s federal and finance ministers will discuss whether to impose an extra 28% tax on crypto transactions. The proposed tax will be charged in addition to the current 30% cryptocurrency income tax.
According to reports, the panel won’t be able to decide on a rate during the two-day meeting. However, they will discuss a rate in the top tax bracket of 28%.
In February 2022, the 30% cryptocurrency income tax went into force. The tax bill, according to India’s finance minister Nirmala Sitharaman, is another step in the right direction toward regulating cryptocurrency.
Crypto trade volume fell 30% a few months following the increased tax rate. The tax rate also prompted significant exchanges like Coinbase and FTX to consider entirely exiting the Indian market.
The 30% income tax wasn’t considered sufficient by Indian officials. A few months after the tax was implemented, India’s previous finance minister declared that higher taxes were required to deter individuals from engaging in cryptocurrency since it is similar to gambling. He advised the present administration to raise the tax rate to 40% or 50%.
Why the additional crypto tax?
Profits generated by centralized trading platforms were subject to a tax rate of 30%. Many Indians flocked to DeFi initiatives, exempt from the crypto income tax, to dodge the high taxes.
The Indian government, however, became aware of the change in investor behavior and began to take additional security measures. A 20% extra tax on revenue derived via DeFi has been sought after, according to information made public in May 2022 by India’s Central Board of Direct Taxes (CBDT).
The Goods and Service Tax Council (GST) of India originally suggested the 28% tax rate that the council will review next week in May 2022. The GST equated cryptocurrency with betting, gambling, and lotteries. The GST established a legal committee to categorize the scope of cryptocurrency within these activities and suggest a suitable tax rate.
Although Indian officials are against citizens using crypto, they state sure do love blockchain technology. Many state departments actively use blockchain technology to keep records and store valuable information.
Moreover, the Reserve Bank of India (RBI) is working on its own Central Bank Digital Currency (CBDC). However, there is little information on where the project currently stands.