Cryptocurrencies will be taxed in India but they are still not legal

The Indian government has announced that cryptocurrencies will soon be taxed in the country. The measures will soon take effect, but there is still a big problem: Cryptos are still not legal in the country.

In India, cryptocurrencies will be taxed from April 1, 2022 – even if they are not officially legal yet. This is what Indian Finance Minister Nirmala Sitharaman said on February 21, the date of the signing of the new Indian Budget Act: I’m not going to wait for cryptocurrencies to be regulated to tax people who profit from them “.

The news has put professionals in the sector, but also individuals, in a strange situation. India is, with more than 100 million citizens owning cryptocurrencies, the first country in the world in terms of users. Many wanted to see the new budget law as a sign that the government was finally legalizing the use of cryptocurrencies, but the situation is far from clear.

Cryptocurrencies will be taxed in India but they are still not legal
The legal status of cryptocurrencies is still unclear in India // Source: Kanchanara / Unsplash

Details of the law

The new Indian budget law specifies several things, but the most important is this: all profits related to the sale of cryptocurrencies will be taxed at a flat rate of 30%. The government also announced a withholding tax of 1% on all crypto transactions. Since March 21, Indian authorities have also clarified that gains from the sale of cryptocurrencies cannot be considered as ” financial services “, but is considered” lottery winnings “.

Apart from the lottery aspect, this fixed tax is similar to that in France: ” capital gains on the sale of digital assets, bitcoins or other cryptocurrencies are taxed at a total rate of 30% “. But unlike France, where cryptocurrencies are allowed, India does not yet have a precise regulatory framework, as evidenced by the government’s reluctance to find the right tax category for cryptocurrencies.

For now, it is not so much taxation that worries the crypto community in India, but rather the issue of legality. As soon as the new Indian budget law was announced, the platform exchanged Binance tweeted like this at ” crypto had just become legal in India “However, the reality is far from that simple. Jagannath Bidyadhar Mohapatra, the director of India’s tax agency, confirmed to CoinDesk that this new rule” did not change the legal status of bitcoin, which will be defined when the Digital Assets Act is passed by Parliament So far, crypto is therefore not legal – although the sale, purchase and exchange of cryptocurrencies is not strictly prohibited in the country.

Cryptocurrencies will be taxed in India but they are still not legal
The future of cryptocurrencies in India is uncertain // Source: Michael Fortsch / Unsplash

Lots of questions

The problem for the Indian crypto community remains that the content of the said regulatory law is still unclear. According to CoinDesk, the bill has evolved tremendously in just a few months. One of the drafts would have called for a direct ban on all private cryptocurrencies, while the current draft would allow their use as financial assets. In any case, the law is still unclear and subject to change.

Nor has a date yet been set for the presentation of the law to the Folketing, and the Minister of Finance has refused to give an estimate. The situation may therefore remain unresolved for some time. The only security currently relates to e-rupee, the digital currency that will be issued by the Bank of India.

The digital rupee is set to launch in 2022 and become an official currency in the country. It is not a cryptocurrency, so a law on the regulation of digital assets will not affect the e-rupee. But its arrival is important because governments have historically preferred to promote their digital currency over cryptocurrencies. And this has often resulted in tougher legislation: this was especially the case in China, which banned the mining of cryptocurrencies before the introduction of its e-yuan, and this could be the case in Russia. , which prepares the arrival of digital sin ruble. For the Indian crypto community, this may mean that the uncertainty about their legality may last for a while yet.

Further

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

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