Transaction tax

Business news, strategy, finance and company insights

The Center plans to introduce a “reverse charge” tax for virtual asset transactions on foreign platforms as part of the latest round of crypto regulations designed to levy taxes on foreign companies such as Coinbase, Binance and Bitfinex, which do business in India. . This would apply to all “virtual digital assets” from Bitcoin, Ethereum and all other coins to NFT and associated income. Currently, foreign crypto exchanges (not registered in India) that cater to Indian investors are not required to pay taxes in the country, while local platforms have paid 18% Goods and Services Tax (GST) on the commission they charge traders. .

Under the reverse charge mechanism, the recipient of the goods or services is required to pay the taxes instead of the supplier. Simply put, if an investor buys digital coins from foreign exchanges not listed in India, then he will have to pay GST on a reverse charge basis. The proposed reverse charge, which has yet to be rolled out, could be taxed at 18% on commissions earned from trading on foreign crypto exchanges. This would increase the overall transaction cost for investors trading on foreign platforms.

The move is also intended to discourage investors who have moved to overseas exchanges to avoid a 30% tax on income from cryptocurrencies and other digital assets. Finance Minister Nirmala Sitharaman in her 2022 budget had proposed a 30% flat tax on income from crypto and digital assets, which came into effect on April 1 after the Lok Sabha passed the finance bill. In addition to this, 1% TDS is also levied each time you sell a crypto asset, whether there is profit or loss, and will be deducted from the crypto tax at the end of the year.