India Says Crypto to Be Taxed Like “Grey Area” Gambling Winnings

The government of India has been split about the future of cryptocurrencies. In 2021, the Reserve Bank of India (RBI) threatened to suspend crypto altogether on multiple occasions. Local crypto experts dismissed this as saber-rattling and they may have been right. The country is now moving to regulate the cryptocurrency industry not by banning it, but by introducing a tax mandate.

India has recently said it would seek to impose a 30% tax on cryptocurrencies and earlier this week a government official confirmed that cryptocurrencies are a “grey area” much like “gambling winnings,” and not illegal. These two developments have been a game-changer for India’s newly-fangled crypto industry which is looking for regulatory certainty to achieve growth and competitiveness.

Taxing Crypto Transactions Same as Taxing Gambling Winnings

Speaking to Bloomberg Television on Wednesday, India’s finance secretary T V Somanathan confirmed that buying and trading crypto in the country is not illegal. Rather, it’s a “grey area” and comparable to how the government taxes gambling winnings, the finance secretary said:

“We have now put in a taxation framework that treats crypto assets the same way we treat winnings from horse races, or from bets and other speculative transactions.”

India finance secretary T V Somanathan

Both gambling and crypto are not explicitly banned in India, but they are not regulated or introduced in any legislation either. There are some exceptions with several states in the country banning either or both activities.

However, the proposed tax that the government may introduce could also bite in the competitiveness of the industry. Thirty percent appears steep to most industry experts. This has not stopped retail investors from putting down more money in crypto over the past months.

RBI has cautioned investors to be wary of participating in crypto initiatives as they carry numerous risks, such as terrorist funding, money laundering, rug pulls, and more. The latest proposed 30% tax and officials speaking about regulating crypto is the most progress that the crypto industry has seen in recent months, and at least sets the country on a course whereby the government isn’t threatening to ban indiscriminately.

Still Work to Be Done Before Tax Is Introduced

Before the taxation can be even voted on it would need to go before the Union Cabinet. If the 30% tax and accompanying regulation are cleared, it would be handed over to lawmakers to debate, amend, and advise changes. This means that while there is a clear fulfillment path for crypto in the country, it’s not guaranteed that it would stick.

The government would also take into consideration what is happening internationally, Somanathan said. In the United Kingdom, crypto is added to the review of the Gambling Act 2005, with other government agencies differing in their views of how crypto should be regulated. India has at least – for now – stopped the chatter of a potential ban.