India’s Finance Ministry Proposes Tightening Crypto Taxation

The government proposed to disallow the set off of any losses with gains from other virtual assets.

On Thursday, the Indian Finance Ministry has proposed to tighten the norms of taxation of cryptocurrencies by insinuating that investors will not be allowed to set off losses in one crypto asset against another. In the Budget for 2022-23, the government had for the first time provided a definition for crypto assets and set out a list of proposals on the taxation of this new asset class, but they did not clarify whether digital assets would be considered currencies, commodities or securities.

On Monday, when considering India's Finance Bill for 2022, Parliament member Sushil Kumar Modi reportedly asked the government to increase the tax on cryptocurrency income from the current rate of 30%. He argued that crypto is not a commodity, asset or service: “Cryptos are similar to the lottery, casino betting, gambling and horse racing. In all these activities, 28% tax (GST) is imposed on the total transaction… so I request that the GST council needs to consider imposing GST on the total transaction value of crypto.”

It is important to remember that, on February 1st, the government had already announced a 30% tax on any income from the transfer of virtual digital assets or crypto assets. That tax proposal covered all emerging digital assets, including NFTS and assets in the metaverse.