India intends to impose a 2% “equalization levy” on investors on cryptocurrency trading transactions from offshore exchanges that provide services to the Indian market, citing the local media sources.
Per a report in the Economic Times on Tuesday, investors may burden extra cost by paying a 2% tax on the settlement price of cryptocurrencies purchased from overseas cryptocurrency exchanges operating in India.
Girish Vanvari, the founder of tax advisory firm Transaction Square, told Economic Times that:
“The levy is on the selling price and companies may be required to add this to the cost of the crypto assets.”
The issue of cryptocurrency regulation has always been a controversial topic in India. Taxation imposing on cryptocurrency transactions may also face a series of challenges in practice. Amit Maheshwari, a tax partner at tax consulting firm AKM Global, believes that it will be complex for the Indian government to levy this 2% equilibrium tax before a fully encrypted asset regulator has been established.
He added that:
“In the absence of any guidelines on the treatment of crypto-assets, there is ambiguity in how these would be treated under the tax laws and FEMA (Foreign Exchange Management Act).”
The Indian government has remained a skeptical attitude towards cryptocurrencies for a long time.
The authority was considering three key aspects to review crypto-related bills recently—the first two around whether new rules can be enacted to accommodate cryptocurrencies. The authorities are trying to explore which areas or types of crypto-related activities to permit or ban entirely.
As early as 2018, The Reserve Bank of India (RBI) declared a clampdown on crypto based on the Supreme Court’s directive. However, the RBI now claims that the older circular can no longer be referenced as it is no more valid based on the date discrepancies.
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