In India And Around The World, How Are Cryptocurrencies Treated?

Cryptocurrencies have long ranged from so-called speculative products to "virtual digital assets" (VDA). As of April 1, India has ...

Cryptocurrencies have long ranged from so-called speculative products to "virtual digital assets" (VDA). As of April 1, India has introduced a tax on all VDAs. The law states that all income from the transfer of digital assets is taxed at 30 percent without deductions and exemptions. This also applies to the offer of digital assets.

This comes at a time when countries are trying different ways to control cryptocurrencies, as more and more investors are entering the area looking for quick profits. Today's column looks at how India and other countries regulate digital assets. Understanding crypto tax in India.

Before examining cryptocurrency tax laws around the world, it is important to understand how cryptocurrencies are taxed in India. In India, a 30 percent income tax is levied on income from the transfer of the VDA, including the NFT. "Taxpayers cannot offset losses from one VDA with income from another VDA. Current income tax laws allow taxpayers to offset their long-term losses with long-term capital gains. who works as a special adviser to law firms in Mumbai and Delhi and advises on cryptocurrency and tax regulation issues.

Kapoor explained that if you make a profit by transferring bitcoin (BTC) and a loss from the transfer to Etherea (ETH), you cannot recover the loss from the transfer of ETH profit by transferring to BTC. "You must pay a flat-rate tax of 30 percent on the profits from the transfer of BTC," he added, adding that "losses from the transfer of cryptocurrencies cannot be transferred against other income. mutual funds.

In addition, losses from the VDA transfer cannot be transferred to next year. This means that losses from the transfer of VDA cannot be offset by future profits that will arise in the next financial year (s). In addition, for VDA transactions to be included in the financial reporting system, each crypto transaction is subject to a 1% withholding tax (TDS). From 1 July 2022, it is proposed to adjust the 1% withholding tax on the total transaction amount for VDA. "This is expected to seriously affect traders because it leads to capital foreclosures and is likely to prevent day trading, margin trading, etc., as such traders operate at very low margins," he said. Kapoor said indianexpress.com.

What about other nations?

In the US, the VDA is treated the same as shares. Any losses may be used to recover VDA transfer tax with a maximum limit of $ 3,000 and any further losses may be carried forward to the next fiscal year to offset any future profits. Short-term capital gains are taxed at a high tax rate based on investors' tax deductions, and long-term capital gains (for VDAs held for more than 12 months) are taxed at a lower rate - 0 percent, 15 percent, and 20 percent.

As in the United States, VDA in the United Kingdom is treated in the same way as stocks. If you buy and dispose of VDA for personal investment purposes, you will have to pay capital gains tax on your income. The United Kingdom allows the deduction of VDA transfer losses from total capital gains.

In Canada, cryptocurrency is perceived as a product, as a stock. If your cryptocurrency is taxed like ours, you will pay income tax on the entire income of the crypto transaction. If your cryptocurrency is taxed as a capital gain, you will pay capital gains tax on only half of all crypto transaction income. Meanwhile, there are countries like El Salvador that have adopted bitcoin as a legal instrument. The country has even announced a bitcoin municipality for its inhabitants, where all transactions take place through bitcoins, ie without real estate tax or capital gains.

"Crypto is still uncontrollable."

It should be noted that Union Finance Minister Nirmala Sitharaman said that the VDA transaction tax was not legitimate for her. Finance Bill 2022 defines VDA in a newly introduced provision (47A) under Section 2 of the IT Act 1961. However, the VDA market in India remains unregulated.

"For the legal identification of VDA under Indian law, it is necessary for the central government to provide definitions and classifications of various variants of VDA through legislation and to regulate VDA as a separate class. From the assets themselves. on the regulation of securities and contracts), "said Kapoor.

The role of technology intermediaries is played by all entities involved in the process of providing a platform for the purchase and sale of VDA (ie stock exchanges, brokers). These intermediaries must be regulated by law.