Union Budget 2022: Cryptocurrency — the word, asset, market has gained immense popularity in India in the last few years. With over 10 crore cryptocurrency investors, India is now home to the highest number of cryptocurrency owners globally, according to a study published WazirX and Nascom. The investment by Indians in cryptocurrency could touch $241 million by 2030, the report said.
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Considering the huge size of the cryptocurrency market and the risk involved with the digital tokens, there should be a proper framework to regularise the asset in India. While the much-awaited Cryptocurrency Bill will not be introduced during the ongoing Budget session of the Parliament, the investors are expecting the finance ministry to introduce a proper cryptocurrency tax policy framework during the Union Budget 2022.
If the government does not prohibit Indians from dealing in cryptocurrencies, we expect that the government could introduce a regressive tax regime for cryptocurrencies, said Naveen Wadhwa, DGM, Taxmann.
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At present, there is specific provision under the Income Tax Act to levy tax on the income from cryptocurrency. The income from crypto assets is taxed as capital gains, according to the general provision. However, some experts want that both the sale and purchase of cryptocurrencies above the threshold limit should be
brought within the ambit of TDS/TCS provisions. It will help the government to get a footprints of the investors in the unregulated digital token market.
Some experts opined that a higher tax rate pf 30 per cent should be levied on the income from the sale of cryptocurrency, similar to the winnings of lottery, game shows, puzzle, etc.
“While the government is waiting on the cryptocurrency bill, much-needed clarity is expected on its taxation in the upcoming Union Budget 2022. There are various concerns about the taxation of crypto, its classification, applicable tax rates, TDS/TCS and GST implications on the sale and purchase of cryptocurrencies, etc. which we are hoping will be clarified during the budget session,” said Archit Gupta, founder and CEO, Clear.
An absence of the specific provisions for the taxability of the cryptocurrency in India, is triggering uncertainties among investors — whether crypto transactions should be disclosed and offered to tax, pointed out Deloitte India. Cryptocurrency investors need clarity on what should be the method of computing the fair market value, costs, taxable income, and reporting requirements.
“It is recommended that a specialised regime for taxation of cryptocurrency be introduced covering, interalia, provisions dealing with classification of cryptocurrencies (capital asset vs. financial instrument vs. commodity), situations in which cryptocurrencies are taxable in India, head of income for taxation, expenses that can be claimed, income tax rate, and reporting requirements,” Deloitte India said in its pre-budget expectations.
Some experts believed that both the sale and purchase of cryptocurrencies should be brought within the ambit of reporting in the Statement of Financial Transactions. The trading companies already do similar reporting of sale and purchase of shares and units of mutual funds.
“We expect the Union Budget to present fine-tuned clarity on the crypto landscape. While the legal implementation still seems a while away, any initiative announced in the Budget would at least open a direct line of conversation on crypto classification as an asset class, its taxation policies and the blue-ocean opportunities available in this globally emerging segment. This would not only encourage institutional investments in the space but also open up job opportunities in the underserved markets,” said Nischal Shetty, of cryptocurrency exchange WazirX.
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