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New tax further curtails India’s crypto currency market

The new taxation regime was announced on July 1, 2022. The cryptocurrency exchanges of India including WazirX, CoinDCX and ZebPay saw a massive plunge of over 60 to 80 percent of the daily trade volumes within just four to five days of implementation.

Photo by Pierre Borthiry / Unsplash

The Indian government’s tax on income from the sale and transfer of virtual digital assets (VDAs) has caused a major decline in the spot trading and intraday volumes of cryptocurrency in India. Under the new regulations, the payment for the transfer of digital assets will include a 1 percent tax deducted at source (TDS). Furthermore, the loss incurred as a result of such transactions of digital assets cannot be offset by other profits.

The cryptocurrency market was already dampened in the face of the 30 percent tax on all Virtual Digital Assets which had been introduced by the government of India on April 1, 2022. The tax, which allows for no deductions or exemptions, was a landmark measure to make cryptocurrencies and non-fungible tokens (NFTs) taxable under Indian law. This tax was applicable to the gifting of digital assets as well. Many crypto traders preemptively sold over 50 percent of their portfolio in response to this announcement.

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