For a long time now, we have been surrounded by virtual currencies and the rate at which its uses cases in day-to-day life are increasing is something that was never really anticipated and one of the major contributors to this huge success is the cryptocurrency industry.
The crypto world has been more than successful in luring in potential investors from all across the globe and has managed to make a name for itself in the global marketplace as well. Not just that, the said industry has had a surge in its overall growth and popularity recently, thus helping it to reach greater heights!
Having said that, I believe, most of you are already familiar with the basics of the industry but, if for some reason that is still not the case, let me help you with that first.
To begin with, cryptocurrencies as the name suggests is nothing but a form of online or digital currencies that can easily be made use of for a variety of purposes including the purchase and sale of goods and services as well as for the purpose of trade and exchange over cryptocurrency exchanges available over the web.
In technical terminology, cryptocurrency is a blockchain-based platform that is known to be decentralized to its very core. Being decentralized, the crypto world becomes more than capable of stepping outside the overall control and jurisdiction of central authorities and can work freely without any unnecessary government interferences as well.
In addition to this, when the industry was first introduced there were not many currencies to choose from and honestly, not many people were looking to be a part of it either as people back then were very skeptical with respect to the return on investments they could expect as well as the safety of their money too.
On the contrary, looking around today, it feels almost unreal to see how far the industry has managed to come, having pools of currencies available today for investors to choose from, with newer ones coming in with each passing day and tons of new investors joining in every hour.
Speaking of a lot of currencies available today in the marketplace, some of the most popular ones worth investing in includes Ethereum, Polkadot, Binance Coin, Bitcoin, PancakeSwap, Dogecoin, Cardano, EverGrow Coin as well as Baby Doge to name just a few of course.
Also, it is worth noting that, some of the major contributing factors for this extraordinary success of the industry include its negligible response time, the convenience it offers, ease of use, portability, intuitive nature, high-profit margins, real-time updates as well as the volatility of course.
Being volatile, it is important for you to be aware of the fact that, it is not always possible to predict the price changes and act accordingly as the price fluctuations in the crypto marketplace are almost immediate, thus leaving no time to plan. Therefore, whenever dealing in online currencies, keep in mind that, if the industry is providing you with an opportunity to earn huge profits and make quick money, if not done right, you could also end up having significantly huge losses as well.
Not just that, as per the chatter amongst some of the leading experts on the field, it has come to our notice that, crypto is rapidly progressing towards completely revolutionizing the global payment system and from where I stand, it looks like it has already started to do so as many merchants and businesses have started accepting crypto as an official mode of payment from their customers.
Now that you have a brief backstory about the crypto world, you will be able to have a much better understanding of what we have with us today, new crypto laws in India. To know more, I suggest you read further!
New cryptocurrency laws in India
With respect to the growing cryptocurrency euphoria in the country, there have been several fast-paced developments on the way forward for virtual currencies with RBI governor Shaktikanta Das kicking it off by sounding caution on cryptos. In other words, it has recently come to light that, cryptocurrencies can prove to be a very serious concern from a financial and economic point of view, Das said a couple of days ago.
As of April this year, cryptocurrency-based gains are said to be taxed at 30 percent, which is the highest tax bracket in the country, and the same rate as lottery winnings. Not just that, this law would be applicable to all ‘virtual digital assets’, right from non-fungible tokens (NFTs) to Bitcoin and other related earnings as well.
On the other hand, if we talk about stock market trading, the tax rate there can range from zero, that is if filed as business income based on tax slabs, to about 15 percent in case it is filed as a short-term capital gain. In addition to this, know that, a tax rate on par with the lottery is just the tip of the iceberg and crypto investors in India will need to be much more aware of other provisions as well in order to remain on the right side of the law in the financial year 2022-23!
Moving further, India is known to have about ten million crypto users, seeing nearly 100 billion dollars in trading volume in 2021. Also, as per the calculations of the founder of WazirX, an Indian cryptocurrency exchange, that could yield about 100 million additional income tax (rounding off to ₹750 crores) in a year.
It is worth noting that, India has been a country that has had a hot-and-cold relationship with virtual currencies over the past couple of years. Not just that, in 2018, it effectively managed to ban crypto transactions after a string of frauds, immediately following Modi’s sudden decision to eliminate about 80 percent of the nation’s currencies, but the Supreme Court struck down all the restrictions in March 2020.
On a similar note, after the Supreme court managed to overturn RBI’s order, which effectively lifted the ban on the trading of virtual currencies, the overall craze in the county has surged at a furious rate.
Furthermore, the new regulations that we are talking about, were meant to be introduced by the Indian government during the winter session of the parliament, which kicked off on November 29 last year. However, the session ended and the crypto bill did not really make it to the table back then.
Know that, this was the second time that ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ was listed on the agenda but got deferred. The last time around was during the Budget session of the Parliament, in February 2021.
Coming back to the topic, as mentioned, the tax rate has been set to 30 percent, which is also one of the highest cryptocurrency taxes seen so far. This specific regulation will be able to extend to all digital assets, starting from Bitcoin, related earnings, non-fungible tokens (NFTs).
Having said that, there will also be an implementation with respect to 1 percent tax deducted at source (TDS) starting from July 1, 2022. Apart from this, the Indian government is working on the classification of cryptocurrency as goods and services under the GST law, so that the overall tax can easily be levied on the entire value of transactions.
According to sources, presently, about 18 percent of GST is levied on services that are provided by cryptocurrency-based exchanges, which are further categorized as financial services. Also, GST officers possess the opinion that virtual currencies are somewhat similar to casinos, lotteries, betting as well as several other activities that have a 28 percent GST on the entire value.
To sum it up, as discussed, investors will be charged a 30 percent tax if they do anything with their crypto-based investments other than simply converting it back to rupees in their bank accounts. Exchanges are also responsible for submitting TDS taxes to the Indian government on a monthly basis, while the 30 percent tax is by far the responsibility of individuals and their chartered accountants.
Also, the government has not yet decided as to how they will be implementing the 1 percent tax when the buyer or the receiver of a certain crypto-based transaction is in another nation altogether. This has really left the crypto exchanges confused. Other than this, all gains from virtual assets are subject to tax effective from April 1, 2023, and the 1 percent TDS will come into effect from July 1.
However, as per the announcement of the Central Board of Direct Taxes (CBDT) dated February 3, all cryptocurrency transactions conducted between 2021 and April 2022 will also be subject to this new tax regulation by the Indian government.
Even though these recent cryptocurrency regulations have managed to clear several doubts that Indian investors may or may not have built up in their minds with respect to these virtual currencies, they are surely not that thrilled about them. Various crypto groups have even urged the Modi government to rethink its planned 1 percent TDS and asked Sitharaman to reconsider her proposal.
Reading so far, I hope you must have gotten a fair insight into the new crypto laws in India kicking off in April and I believe, now you’ll be able to better plan your future with cryptocurrencies by taking into account all the new laws and regulations stated by the Indian government.
As mentioned at the very beginning, crypto is a highly volatile marketplace and is extremely uncertain. Thus, you need to understand the fact that all cryptocurrencies have their own risks as well and you should invest only if you are willing to take those risks and bear any losses if at all necessary.
In conclusion, what are your thoughts on the new crypto laws in India? Do let us know in the comments area below. To know more about various cryptocurrencies, do check out other articles we have on our website. Thank you for your time & if you found our content informative, do share it with your investor friends!