The Indian Finance Bill 2022, with new 30% crypto tax rules, was approved on Thursday by the Rajya Sabha, the upper house of the Indian parliament, to make it a law, which will come into effect starting on April 1.
The approval of the bill by the upper house of the parliament comes within a week of the lower house’s (Lok Sabha) approval.
The Finance Bill was introduced during the budget session 2022–2023 of the parliament in January. The Finance Bill amended tax rules to impose a 30% crypto tax on digital asset holdings and transfers. Apart from that, traders cannot offset their losses against profits, and each trading pair will be considered independently for tax deductions.
If 30% tax was not regressive enough, the government also imposed a 1% tax deduction at source (TDS) on each trade, claiming it would help them track the movement of funds. However, exchange operators have warned that the 1% TDS would dry up liquidity.
The infamous bill has been scrutinized by various experts, traders and exchange operators alike. However, the government has decided to carry forward with its regressive approach without taking input from the stakeholders of the crypto ecosystem.
Another reason for the crypto community’s outrage is the fact that the new crypto tax has been heavily inspired by countries’ gambling and horse betting tax rules. This signifies that the Indian government likens the crypto market to gambling.
The new crypto tax policy in India was finalized and approved within two months, while the finance ministry has yet to offer a regulatory framework around the nascent market despite years of assurance. Many crypto entrepreneurs in the country believe it will lead to a brain drain of talent and that traders will eventually turn to decentralized exchanges and foreign platforms to conduct their crypto trades.