Do you love paying your taxes? The truth is there are a lot of people who would live with zero tax payment if they had a chance. India’s crypto income policy has been a long subject of discussion with traders trying to find a legal way around it.
All crypto and virtual assets owned by an Indian national are subject to a 30% income tax, according to Finance Minister Nirmala Sitharaman. Investors feel that this rate is too high and are trying to find a way out. One of the tricks that are becoming popular is based on the assumption that investing in foreign exchange will help you avoid taxes.
Legal experts are of divergent opinions. They say it’s impossible to avoid the 30% income tax through foreign exchange. The tax applies to all Indian nationals and is not limited by location. That means whether you make your money in India or not, you still need to give Caesar what belongs to him, informed pocket option trading.
“The new 30% tax regime introduced via Finance Act, 2022 must not be confused with a tax on exchanges. It is a tax on the income of the trader. Thus, in my view irrespective of the location of the exchange, income would be chargeable to tax for the reason that the taxable event is the profit earned through crypto trading. The provision is jurisdiction neutral and would not matter whether profit is earned in a local or a foreign exchange,” Sameer Jain, Managing Partner at PSL Advocates & Solicitors.
Indian investors who are disgruntled with this tax regime have had to move out of the country and run their businesses from countries such as Singapore, which are widely known for friendly crypto tax policies. The government however announced that the tax is not based on location. Traders have to pay taxes as long as they are making money from crypto.
“Investors must bear in mind that the tax regime imposed in India is not based on the location of the crypto exchanges. Any crypto exchange providing service to the Indian Customers having their base outside India would not exempt the Indian Investors from tax regime as it is irrespective of the location where the crypto exchange trading is done,” Utsav Trivedi, Partner at TAS Law, said
Anushkaa Arora, Principal, and Founder, ABA Law Office explains that tax avoidance is legally used to lower tax burdens, while tax evasion is the act of failing to pay the required tax. Tax evasion is illegal and subject to government penalties. He went on to urge Indians to take this tax as a positive step for the government towards recognizing crypto and creating a legal operation environment. Many investors were waiting for the government announcement on the legality of digital coins, hence we expect to see more cash inflows towards these kind of investments.
“It is wrong to say that people may avoid the 30% tax by trading on International exchanges using crypto. This shall be an attempt at tax evasion, as seen by concerned departments/authorities. The said transaction shall fall under Section 115AD of the Income Tax Act, 1961, as per facts of each case, hence it is better to be alert than to be sorry later,” said Anushkaa Arora.
