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On June 28–29, a panel discussion between India's federal and state finance ministers will decide whether to enact a new tax on cryptocurrency transactions.
The proposed tax will be imposed in addition to the current 30 percent cryptocurrency income tax.
According to reports, the panel won't be able to decide on a rate during the two-day meeting. They will undoubtedly talk about a rate in the top tax bracket of 28 percent, though.
In February 2022, the 30% cryptocurrency income tax went into force. The tax bill, according to India's finance minister Nirmala Sitharman, is another step in the right direction toward regulating cryptocurrency.
“Any income from transfer of any virtual digital asset shall be taxed at the rate of 30%. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except cost of acquisition.”
The volume of cryptocurrency trade fell by 30% a few months following the increased tax rate. Major exchanges like Coinbase and FTX were also prompted by the tax rate to think about fully exiting the Indian market.
The 30% income tax, however, was not deemed 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 exhorted the present administration to raise the tax rate to 40% or 50% and said:
“There is no advantage of cryptocurrency for this country. I request the youth of this nation to not go towards cryptocurrency.”
The Indian government intends to impose two new taxes on the cryptocurrency business in addition to the existing 30 percent income tax.
Profits generated by centralised trading platforms were subject to a tax rate of 30%. Many Indians flocked to DeFi initiatives, which were exempt from the crypto income tax, to dodge the high taxes.
The Indian government, however, became aware of the change in investor behaviour and began to take additional security measures.
A 20 percent 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 percent 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 categorise the scope of cryptocurrency within these activities and suggest a suitable tax rate.
The committee in question raised the prospect of applying a 28 percent higher tax rate to cryptocurrency transactions in an effort to deter Indians from using them.