Taxation Rules on Crypto Adopted by the Lok Sabha
The Central Government's plans to tax cryptocurrencies and other digital assets was first announced by the Union Minister of Finance Nirmala Sitharaman during her FY2022-23 budget speech in the Rajya Sabha earlier in February this year. Later, in March, the Lok Sabha approved the rules for taxing all sales of Virtual Digital Assets (VDA) during the adoption of the 2022 Finance Bill.
The ‘crypto tax' on the profits from sales of VDA is effective from April 1, 2022 and “any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent,” as per the initial announcement by FM Sitharaman.
The only deductions recognizable by the Indian tax authorities will be the cost of acquisition of the cryptocurrency or other digital asset, thus the total gain made in such a deal will be taxable with no consideration of any other expenses or allowance made. In addition, losses from sale of VDA cannot be set off against profits from any other deal, including other transactions with VDA.
If you receive a gift consisting of a cryptocurrency or a digital asset, this will also be taxable, but it is yet unclear how such a gift will be evaluated for levy purposes.
A further Tax Deducted at Source (TDS) will become applicable after July 1, 2022 at a rate of 1 per cent from any transaction with crypto or VDA, subject to an annual threshold limit of ₹50,000. The TDS will be applicable regardless if the transaction is made at a profit or a loss, but in the latter case, a claim for refund of the TDS can be filed.
Regulation on Gambling is Long Overdue
The government was rather quick to lay its hands on profits made from new-age crypto, non-fungible tokens (NFTs) and other virtual digital assets, without taking care to introduce any other regulation over the sector. The rate of the income tax levied puts crypto in the same bracket as gambling and betting on horse races, lottery, and other legal or ‘grey area' wagering options, while long awaited regulation on gaming is still far from being implemented in India.
“While the pros and cons of gambling have been the talk of the town since the birth of the Public Gambling act back in 1867, cryptocurrencies have done what no one thought would be possible; in a matter of months, united the country in making sure specific profits aren't seeping out from India's pockets,” like stated by Felicia Wijkander, Chief Editor at India's Biggest Casino Comparing Platform SevenJackpots.“Something that could've been done for online gambling years ago to earn India some sweet crores in tax profit,” Felicia adds.
A number of developed economies around the world, including the US, the UK and many EU member states, have opted to regulate gambling and online gaming not just for the taxes such a move brings, but most importantly to bring customer protection and responsible gaming standards to the field.
In the meantime, India shies away from any regulation on gambling due to some ‘high moral stance' on the subject. This obviously means that letting people get addicted, sink in large debt and at the end contemplate suicide in an unregulated gaming environment, is the ‘right thing to do'.
Obviously, again, obligating gaming operators to implement responsible gaming tools, effective KYC and age verification protocols, weekly or monthly betting and play-on-credit limits, fast-play restrictions, as well as having same operators put a mental health support and self-exclusion buttons on their pages, just like the countries with developed economies have done, is a ‘morally corrupt' thing to do for India.
Both crypto and gambling need regulation, and not just taxation rules, as both markets have a high economic potential, but, as anything in this world, come with a certain societal cost and risks for the individual that must be mitigated.
“At the end of the day, I believe that crypto regulation is a must and that it's crucial that online gambling is acknowledged for the potential it already has. The momentum from crypto should absolutely be used in order to make progress towards a more liberal and educated online gambling landscape in India,” Felicia concludes.
