IndiaTech, an industry organization representing consumer internet businesses, has written to Finance Minister Nirmala Sitharaman requesting clarification on cryptocurrency taxes in the Union Budget 2022–23.
IndiaTech has asked the government to amend current tax rules to incorporate crypto assets and has demanded clarification on taxes and their disclosures in the letter, portions of which have been accessed by ETtech. The letter comes against the backdrop of the much-delayed Cryptocurrency Bill 2021, which was supposed to be submitted at the just-finished winter session of parliament.
“The budget should ideally offer coherent rules on direct taxation and the GST Council should detail the applicability of taxation, else there will be confusion, IndiaTech’s president and CEO, Rameesh Kailasam, told ETtech. “Basically, the line of thinking is that we shouldn’t be waiting for a bill alone and the Budget should begin the process.”
IndiaTech has requested the Finance Minister to recognize cryptocurrencies as digital assets rather than currency. Currently, there is little certainty about how cryptocurrencies will be taxed in India, owing to uncertainty over whether they should be classified as currencies, securities, or some other form of asset. Income tax rates on asset returns range from 10% to 35%, and the way cryptocurrencies are classified may potentially influence GST rates.
IndiaTech has suggested that a flat 18% GST be imposed only on the platform commissions of the exchanges (brokerage or exchange fees per trade) instead of the total amount, as is done in the case of e-commerce transactions.
For direct taxes, the industry association has advocated enabling rules to recognize and treat it as income from capital gains or income from business and profession, depending on the kind of business of the holder and the timeliness and form of holding.
Other proposals include a disclosure obligation for people owning crypto assets after the fiscal year, similar to the disclosure rules proposed by the Ministry of Corporate Affairs for firms holding crypto assets.
IndiaTech has also proposed mandating Know Your Customer (KYC) standards, Indian ownership requirements for crypto exchanges, and granting authorized dealers status to exchanges importing cryptocurrency.
India trails well behind China, the United States, Japan, Russia, and other nations in terms of technology and financial literacy. Adopting cryptocurrencies in a competent and well-regulated manner will place India ahead of many other rising markets. To accomplish, so, however, the general public and the country’s financial decision makers must better understand cryptocurrencies and digital assets.
Blockchain is a technology that we can modify to our liking and reap the advantages of. Similarly, cryptocurrencies will have a similar impact on moving the economy forward.