February 25, 2024

Not long ago, after introducing a 30% tax on crypto-related earnings in the country, the government of India has shifted its attention to cryptocurrency investors.

According to the Indian Ministry of Finance, crypto miners are to pay a flat tax rate of 30% to continue the government’s drive to achieve inclusive taxation in the crypto industry.

In providing further clarification on the newly imposed tax, the Ministry of Finance reiterated that any loss incurred in a single crypto trade could not be settled using the gains of a different token. And the cost of establishing or building a mining facility is not part of the deduction and the cost of the acquisition.

India’s Crypto Adoption

The country is nowhere near the massive adoption of cryptocurrency, as found in other countries like the United States or even Ukraine. 

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The bulk of crypto adoption and use is composed of the younger generation of Indians who, like their counterparts in other parts of the world, are the driving force behind the digital currency.

However, the government has taken significant steps to protect investors and their funds from fraud and illegal transactions.

Meanwhile, the opposition members in the Indian Parliament have been grilling the Ministry of Finance with questions to clear their doubts about the viability of digital financial assets in the last Parliament session.

Cryptocurrency Regulation in India

The Indian minister of state for finance, Pankaj Chaudhary, revealed that the government has yet to put in place a regulatory framework for overseeing the activities of the crypto industry in the country. Even though the country has acknowledged that cryptocurrency has come to stay, even in the absence of well-detailed regulations, the government has begun imposing a tax on digital currency activities.

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Due to the absence of laws guiding their operations, cryptocurrency in India cannot serve as legal tender but can be exchanged. A rather interesting thing about this is the government’s refusal to comment on the legality of digital tokens. 

The more confusing aspect of this is how crypto is taxed and still not deemed legal by the government. After all, as some experts noted, only legal products and services can be taxed.

The bill to give legitimacy to cryptocurrency in India might take some time, and the government appears not to have the patience to wait for that to manifest; it has instead started taxing the industry.

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CoinDesk engaged with several experts in India, including crypto industry players, government officials, and lawyers, to find out if running a crypto exchange or dealing in digital currency attracts stiff penalties in the country.

The answer is that there is no jail term for engaging in crypto-related transactions. Still, any violation of existing government rules on digital finance faces a fine of about Rs. 20 crore, which is approximately $2.7 million, and will also serve 18 months in jail.

Nonetheless, the experts believe that the government will likely roll out the regulations that would ultimately make crypto legal.

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