India gov’t proposes 2 new taxes despite pending digital currency ban

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The Indian government is reportedly looking to ramp up measures to tax digital currency, in a move that would see two separate taxes levied against digital currency transactions.

The measures would apply from the 2020-21 tax year, and are expected to be brought in by a circular, according to reports from sources close to the country’s finance ministry.

It comes as authorities in India are moving to ban the use of digital currency in the country, despite the attempts to secure a share of revenue from the sector.

According to local press reports, the taxes are expected to take the form of a sales tax on exchange fees for digital currency transactions, which would stand at 18%, as well as a personal income tax liability on the gains from digital currency trades.

An official from the finance ministry said the measures would see digital currencies taxed as financial services.

“Bitcoins will be categorized as financial services attracting 18% GST on fee commission collected under this segment. Plus, [personal] tax to be paid on the earnings from this.”

There has been no official announcement made so far, though the measures are expected to be decreed in a circular soon, according to the source.

Despite the introduction of the tax however, the long-term options for the digital currency sector in India remain uncertain, with the authorities keen to point out that just because a tax exists does not mean the transaction itself was valid or lawful.

“Let it be clear that just because income tax or GST has been charged on the transaction, it does not by itself make the transaction legitimate. Taxability and legality of transactions are independent of each other.”

Depending on the income of the individual concerned, personal tax on gains could stand at as much as 30%.

The measures are currently being rushed forward to take account of the current tax year, which ends in April. It remains unclear how gains in digital currency assets would be defined for tax purposes.

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