In India, a ministerial committee is expected to meet next week to discuss the issue of the Goods and Services Tax (GST) that will be applied to bitcoin (BTC) and other cryptocurrencies. At the same time, tax cuts (TDS) for crypto asset transactions will begin in the country from July 1.
India wants to enrich its tax basket using cryptocurrency
According to a recent publication by Bloomberg, the finance ministers of the federal government of India and its federated states were invited to the assembly to discuss the cryptocurrency tax regime. The working group was held for two days starting June 28 in Chandigarh, a city located in the north of the country.
The aim of this meeting is to diversify sources of taxation, with a strong emphasis on cryptocurrencies. In addition, it also aims to identify ways to strengthen control over transactions involving digital assets.
According to informants Bloomberg, it is certain that the KPU will not set a tax quota at this reflection stage. However, it is quite possible to reach the maximum range of 28%. As a reminder, earlier this year, the Goods and Services Tax Council of India made a recommendation to set the tax rate for crypto assets at this percentage.
Withholding tax on income from cryptocurrency
India’s new finance law provides direct tax deductions when transferring cryptocurrencies. This directive is in the subsection 194S The Income Tax Act of 1961, which will enter into force on July 1, 2022.
It stipulates that each entity, which is responsible for exchanging digital assets for fiat currency, is required to deduct an amount equal to 1% of the total amount of sales for income tax. In addition, this tax levy must be made when the amount is credited to the seller’s account, regardless of the resulting gain or loss.
In addition, 1% TDS will be charged on buy and sell transactions involving two cryptocurrencies. In particular, if there is an exchange of BTC for tether (USDT), 1% TDS will be retained when selling BTC and 1% TDS will also be retained when USDT is exchanged for BTC.
However, tax cuts will not be imposed when investors deposit their funds on the exchange. In addition, the current TDS guidelines only apply to Indian exchanges. They do not apply to foreign exchange and DEX yet.
Like many countries, India is currently developing its regulatory framework to take advantage of the tax benefits of selling cryptocurrencies. This income makes it possible to replenish the state treasury and can be used to develop the country’s economy. This supports the idea that, instead of rejecting crypto assets, they should be regulated, as their use can benefit many people.
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