India’s proposed taxation law of virtual digital assets won’t permit individuals to offset loss on one asset against profit from another, the Ministry of Finance said Monday in a move that the head of the nation’s top cryptocurrency exchange termed as “detrimental” and “regressive.”
India proposed law for taxing virtual currencies in February this year. It proposed taxing income from the transfer of any virtual assets at 30%. To capture details of all such crypto transactions, New Delhi proposed a 1% tax deduction at source on payments made related to purchase of virtual assets.
In a clarification posted on Monday, the Ministry of Finance today announced its intention to tax each digital asset investment independently, a departure from how the nation regulates transactions at the stock market, punishing an industry that is already set to face some of the world’s steepest tax rates.
The clarification, which also says that infrastructure costs for mining cryptocurrency cannot be seen as cost of acquisition, comes less than two weeks before the proposed crypto taxation law is set to go into effect (April 1).
The crypto community in India aired its shock at the announcement, with several founders expressing their disappointment.
Ashish Singhal, co-founder and chief executive of Andreessen Horowitz-backed CoinSwitch Kuber, said Monday’s move is “detrimental for India’s crypto industry and the millions who have invested in this emerging asset class.”
Singhal cautioned that such a step could drive users to underground peer-to-peer markets, where users are not required to confirm their real identity, hence defeating the purpose of the tax.
The federal budget from earlier this year “recognised virtual digital assets (VDAs) as an emerging asset class. Therefore a natural course of action would have been to progressively bring the regulations at par with other asset classes,” he said.
“Instead, today, with this clarification, we have taken a step backwards. If a regressive provision such as this would have been applicable in equities, it would have discouraged retail investors from participating,” he added.