Cryptocurrency will be taxed in India, but it is still illegal

The Indian government has announced that taxes on cryptocurrencies will soon be introduced in the country. The measures will take effect soon, but there is still a big problem: cryptocurrencies are still illegal in the country.

In India, cryptocurrency will be taxed from April 1, 2022 – even if it hasn’t officially become legal yet. This is what Nirmala Sitharaman, India’s Finance Minister, said on February 21, the date of signing the new Indian Budget Act: I don’t intend to wait for cryptocurrency to be regulated to tax the people who profit from it “.

The news has put professionals in the sector, as well as individuals, in a strange position. India, with more than 100 million citizens owning digital currencies, is the number one country in the world in terms of the number of users. Many wanted to see the new budget law as a sign that the government had finally begun to use crypto assets, but the situation is far from clear.

The legal status of cryptocurrencies is still unclear in India // Source: Kanchanara / Unsplash

Law details

India’s new budget law sets out several things, but the most important is this: all profits related to the sale of crypto assets will be taxed at a flat rate of 30%. The government has also announced a 1% withholding tax on all crypto transactions. Since March 21, the Indian authorities have also made it clear that the gains from the sale of crypto-assets cannot be considered as” Financial Services “, but considered” lottery winnings “.

Aside from the lottery aspect, this flat-rate tax reminds us of what’s in France: ” Capital gains from the sale of digital assets, bitcoins or other cryptocurrencies are taxed at an aggregate rate of 30% But unlike France, where cryptocurrencies are allowed, India does not yet have a rigorous legislative framework, as evidenced by the government’s reluctance to find an appropriate tax category for crypto assets.

At the moment, it is not so much taxation that worries the crypto community in India, but rather the issue of legality. Once the new Indian Budget Act is announced, the exchange platform This is how Binance tweets that ” Cryptography is now legal in India However, the reality is far from simple. Jagannath Bidyadhar Mohapatra, Director of India’s Tax Agency, confirmed to CoinDesk that this new rule “. It did not change the legal status of Bitcoin, which will be determined when the Digital Assets Regulatory Act is passed by Parliament Therefore, at the moment, crypto is not illegal – although the sale, purchase and exchange of cryptocurrency is not completely prohibited in the country.

Cryptocurrency will be taxed in India, but it is still illegal
The future of cryptocurrency in India is uncertain // Source: Michael Fortsch / Unsplash

So many questions

The problem for the Indian crypto community remains that the content of the said regulatory act remains unclear. According to CoinDesk, the law has evolved significantly within a few months. One draft called for a total ban on all private cryptocurrencies, while the current draft would allow them to be used as financial assets. In any case, the law remains unclear and subject to change.

No date was set for submitting the law to Parliament, and the Finance Minister refused to give an estimate. So the situation could remain indeterminate for some time. The only sure thing, for now, is the e-rupee, the digital currency that will be issued by the Central Bank of India.

The digital rupee will be launched in 2022, and it will become the official currency of the country. It is not a cryptocurrency, so the Digital Asset Regulation Act will not affect the electronic rupee. But its reach is significant, as governments have historically preferred to promote their own digital currency rather than cryptocurrency. This has often led to stricter legislation: this was particularly the case in China, which banned cryptocurrency mining before the introduction of the electronic yuan, and this may be the case in Russia, which is preparing for digital access. Sin ruble. For the Indian crypto community, this may mean that uncertainty about its legality may persist for some time now.

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What is the difference between cryptocurrency and digital currencies?  // Source: Annie Spratt / Unsplash

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