The government has tightened norms for crypto by disallowing losses incurred in a particular digital asset to be set off against income from another version of a crypto holding, junior finance minister said on Monday.
The government won't allow tax breaks on infrastructure cost incurred while mining of crypto assets as it won't be treated as cost of acquisition, Minister of State for Finance Pankaj Chaudhary told lawmakers in parliament.
The clarification by the minister is a further set back to an industry that was slapped with a steep tax rate in the budget unveiled last month. The RBI and the government are skeptical about the sector despite a rise in trading volumes as it fears digital currencies can be used for money laundering, terrorist financing and price volatility.
"Treating profits and losses of each market pair separately will discourage crypto participation and throttle the industry's growth. It's very unfortunate, and we urge the government to reconsider this," says Nishcal Shetty, co-founder and chief executive officer of Binance-owned WazirX.
The crypto asset tax regime in India will gradually roll out in the financial year starting April 1. Provisions on the 30% tax will be effective at the start of fiscal year while those related to the 1% TDS will come into effect from July 1, 2022.
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