The government could consider in the upcoming budget a TDS/TCS tax on buying and selling cryptocurrencies that exceed a certain threshold and such transactions should be placed within the scope of the specified transaction for the purpose of reporting to the income tax authorities, Nangia Andersen LLP Tax Leader Aravind Srivatsan said.
He said that a higher tax rate of 30 percent should also be levied on income generated from the sale of cryptocurrency, such as winnings from lotteries, game offers, puzzles, etc.
Speaking to PTI about the budget 2022-23, which the government will unveil on February 1, that could be hoarded by the crypto industry in India, Srivatsan said that currently India has the largest number of cryptocurrency holders globally, at Rs 10.07 crore. According to a report, Indians’ investment in cryptocurrency is expected to reach $241 million by 2030.
“It was expected that a bill would be introduced during Parliament’s winter session to regulate cryptocurrency. However, it was not introduced, and the government is now expected to take up this bill in the budget session. If the government does not ban Indians from dealing in cryptocurrency, we expect the government to introduce A regressive tax regime for cryptocurrencies.
He said that given the size of the market, the amount involved, and the risks associated with cryptocurrencies, some changes may be made to taxes on cryptocurrencies such as placing them within the provisions of withholding tax at source (TDS) and tax collected at source (TCS) above the cap would help The government is getting “investor fingerprints”.
Both buying and selling cryptocurrencies should be placed under the reporting scope on the Financial Transactions Statement (SFT).
He said commercial companies are already doing similar reporting on buying and selling stocks and mutual fund units.
To monitor high-value transactions made by the taxpayer, the Income Tax Code has the concept of SFT or Reportable Account.
This helps the tax authorities to gather information about some specific, high-value transactions that a person makes during the year.
Financial institutions, companies and brokers in the stock market fall under the purview of SFT reports. Srivatsan said that similar to winnings from lotteries, game offers, puzzles, etc., income generated from selling cryptocurrency should be levied at a higher tax rate of 30 percent.
Ahead of the winter session of Parliament, which ended on December 23, the government had introduced a bill on regulating cryptocurrency. The bill comes amid concerns that such currencies could be used to lure investors with misleading claims.
Currently, there is no regulation or any ban on the use of cryptocurrencies in the country.
The “Cryptocurrency Law and the Regulation of Official Digital Currency Law” is now expected to be presented in Parliament’s budget session, which begins on January 31.
Separately, the government is considering changes to the income tax laws to include cryptocurrencies within the tax network, some of the changes that could form part of the 2022-23 budget.
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