Many industry participants have decried India’s crypto tax regime as too harsh and discouraging innovation. As such, it was unsurprising to see a level of excitement when the country’s Tax Department’s website displayed a 0.1% tax-deducted-at-source (TDS) for crypto instead of the announced 1% in March. However, these celebrations have been short-lived as the government clarifies that it is still sticking with the 1% TDS.
A Typographical Error
On Wednesday, some Indian crypto news outlets disclosed that the Income Tax Department had changed the announced 1% TDS on crypto to 0.1% based on information on the country’s Income Tax website. However, the government has informed the public that such information was false and a typographical error.
“Some media reports have come to the notice of CBDT (Central Board of Direct Taxes) claiming that the rate of TDS on Virtual Digital Assets (VDA) has been reduced to 0.1%. It is hereby clarified that there is no change in the rate of TDS on VDA, which continues to be 1%,” wrote the Income Tax Department in a tweet later on Wednesday.
It is worth noting that the 1% TDS on crypto is expected to take effect from July 1, in addition to the 30% capital gains tax that came into effect in April. So far, the new tax rules have led to a significant reduction in the country’s crypto trading volume, even as startups consider migrating to the UAE.
As reported by ZyCrypto on Thursday, the Indian government is set to release comprehensive guidelines for its crypto taxation regime before July 1. Sources say it may offer a crypto tax-exempt status to certain industries.
The Continued Delay Of Crypto Regulations
The Indian government has decided to tax the emerging crypto market before setting clear regulations as they lean towards discouraging participation in the crypto markets. In previous statements, the government has made it clear that it intends to wait on a global consensus even as it is presently consulting with the IMF on the issue of crypto regulations.
The Securities and Exchange Board of India reportedly said the decentralized model of the crypto markets would make the enforcement of crypto regulations difficult. India’s market regulators said this before the Parliamentary Standing Committee on Finance. However, the SEBI clarified that for the Indian government to regulate the crypto markets effectively, digital assets would have to be classified according to their features which could necessitate the involvement of other regulators as not all can be classified as securities.