India – the 30% tax is too much

The crypto space like other derivatives markets is faced with volatility. Great development has been made as regard decentralized finance (Defi); crypto savvy individuals can earn passively. With massive trends on cross-chain transactions, liquidity mining, governance token, integration of traditional finance (TradFi) into Defi, among others, the crypto space shows more reason while banning isn’t an option, regulating the space gives room for further adoption globally.  Banning and regulation are two different things. A ban on crypto will cripple if not all investors and traders whereas regulation is a win-win situation for all parties (Government, Traders, Investors, etc). Regulation makes “crypto” legal

India has taken a bold step in legalizing digital assets by introducing a 30% tax on crypto gains. This announcement was made by Indian Finance Minister, Nirmala Sitharaman, during the budget speech.

“Profits from the sale of virtual assets would be taxed at a flat rate of 30% without any deductions or exemptions. The rate is on par with the highest income tax band, which applies to individuals earning more than 1.5million rupees ($20,000) a year. The government also introduced a 1% tax, deducted at source (TDS) on cryptocurrency trading.”

She further stated that the Indian government will be launching its own central bank digital currency (CBDC) and a time frame was given for this to be accomplished i.e April 2022-March 2023. She explained more on the adoption of CBDCs,

“Digital rupee will be issued using blockchain and other technologies; to be issued by RBI starting 2022-2023. This will give a big boost to the economy.”  “There has been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”

Central Board of Direct Taxes Chief, J.B.Mohapatra debunked several headlines saying “India legalizes crypto”. He said, the announcement made by the minister doesn’t necessarily make crypto trade legal in India. He further explains the reason for crypto taxation; “this will help the department to measure the exact depth of digital asset market.”

Sequence to this, Indian finance secretary, Somanathan, tweeted, in his tweet he further elaborates what the minister and CBDT chief had said:

“Digital currency will be backed by RBI which will never be default. Money will be of RBI but the nature will be digital. Digital rupee issued by RBI will be a legal tender. Rest all aren’t legal tender, will not, will never become legal tender.”

He further tweeted:

“Bitcoin, Ethereum, or NFT will never become legal tender. Crypto assets are assets whose value will be determined between two people. You can buy gold, diamond, crypto, but that will have not have the value authorization by govt. People investing in private crypto should understand that it does not have the authorization of govt. There is no guarantee whether your investment will be successful or not, one may suffer losses and govt is not responsible for this.”

The steps taken by the Indian government has given the crypto space more room for growth. Crypto experts accept the move by the India government and called it a progressive move.

WazirX token WRX benefited positively after the speech made by the Minister as price surged nearly 30% to over $1.

Also, CEO of Binance, Changpeng Zhao, tweeted saying:

“Crypto is legally recognized in India, with a 30% tax”

 

The Binance twitter handle tweeted as well:

“Crypto just became legal in India! The Indian government has cleared confusions in the form of a crypto asset tax law”

 

Most people who are unhappy right now are day traders. They book petty percentage profits, and this wouldn’t go well with them. People holding for the long term will slightly be less worried than the day traders, said Lalwani in a Telegram chat with Coindesk.

While some experts criticized the 30% tax on crypto gains believing it could deter retail investors.

According to a Coindesk report, there might be movement in people liquidating their crypto portfolios and moving to the equity market. The 30% tax is too much. Also, according to an unnamed source, reported on Coindesk, “in the past, the government has said it seeks to prohibit all cryptocurrencies in India but will allow certain exceptions to promote the underlying technology. How will you promote the underlying technology with 30% tax?

India progressive move has a great impact on the crypto space despite the pros and cons attached to the move. Experts in the industry have expressed their views and the bottom line is crypto is gaining momentum and massive adoption is coming.

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