Cryptocurrency Income Tax Rules (Budget 2022 Expectations): Even as crypto assets are unregularised, their popularity has skyrocketed in India. The Government is expected to introduce a cryptocurrency bill in the upcoming Budget Session of the Parliament. However, crypto industry insiders, investors and traders are expecting the introduction of a proper tax policy framework for crypto earnings in the upcoming Budget 2022.
Tax experts are expecting the Budget to provide clarity on the taxation of crypto earnings. At present, there is no specific provision in the Income Tax law for cryptocurrency taxation.
“As per general provisions, it is taxed under the Capital gain head. However, as per the opinion of a few professionals, it is to be taxed under the head of other sources of income since no specific head is defined. In some cases, where the volume of transactions is high, it may be treated as a business income also. Therefore, there is no clarity on the taxation of cryptocurrency, so it is expected from this budget to bring specific provisions for cryptocurrency taxation,” Abhishek Soni, Co-founder and CEO, Tax2win, told FE Online.
Archit Gupta, Founder and CEO, Clear, is also of the view that the Budget should provide the much-needed clarity of crypto taxation.
“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,” Archit Gupta said.
Cryptocurrency Tax: Contentious issues
According to Deloitte India, in the absence of specific provisions governing the taxability of cryptocurrency in Indian tax laws, there are several open issues triggering uncertainty. Such as:
- Whether crypto transactions need to be disclosed and offered to tax
- 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.
What crypto industry expects
For everyone interested or engaged in cryptocurrencies, all eyes are on clarity on taxation aspects. It remains to be seen whether the Government will provide tax clarity on crypto assets in the Budget itself or set the rules separately in the upcoming cryptocurrency bill.
“Besides regulatory clarity, we expect better clarity from the government on crypto taxation. India has been witnessing an economic recovery despite the COVID waves. A regulatory clarity will give the crypto sector a boost, accelerate its growth and potential to contribute to our $5 Trillion economy vision,” said Nischal Shetty, of cryptocurrency exchange WazirX.
“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,” he added.
Gaurav Dahake, CEO & Founder Bitbns, also said, “From the upcoming union budget, we expect clarity in terms of how crypto transactions will get regulated. There have been many discussions going around in the crypto space; however, no concrete output so far.”
“We expect detailed clarity on how it will be regulated and an introduction to a tax regime that would be more fruitful. 2021 was the most significant year in terms of how things shaped up for the crypto industry in India and as a crypto community, he added.
Charles Tan, Head of Marketing at Coinstore, a Singapore based crypto exchange which recently started its operations in India, said, “In order to expand faster, we look forward to positive announcements for foreign digital asset exchanges which will enable them to become a part of India’s growth story. Hopefully, there will be more business-friendly rules when it comes to registering crypto companies in India and getting regulatory clearance so that foreign exchanges can operate with confidence and serve the growing user base in India. Clarity on crypto regulation and taxation will be really helpful in creating a long-term business plan for our India operations.”
Toshendra Sharma, Founder and CEO of NFT marketplace NFTically, said, “Given the fact that the marketplace for digital assets and services expanded manifolds within the country, we are hopeful the government will bring clarity on regulations around blockchain technology. We are optimistic that policies that come in play will further increase the ease of doing business in India and make the country a leader in a futuristic industry.”
“The crypto industry has stayed amidst speculation for a couple of years now. With the upcoming budget, we expect the government to introduce the regulations that the community has been waiting for a long time. Positive growth is only possible with the introduction of a stringent framework. This is also expected to welcome a heavy fund infusion in the country by foreign investors,” said Kumar Gaurav, Founder & CEO of Cashaa.