Government proposes to change tax laws in the Budget, cryptocurrency earnings may be taxed

Government proposes to change tax laws in the Budget, cryptocurrency earnings may be taxed

Sushmita Goswami | Nov 20, 2021 |

Government proposes to change tax laws in the Budget, cryptocurrency earnings may be taxed

Government proposes to change tax laws in the Budget, cryptocurrency earnings may be taxed

Revenue Secretary Tarun Bajaj told news agency PTI that the union government is preparing adjustments to income tax legislation to bring cryptocurrencies into the tax net. Some of these changes could be included in the Budget next year.

According to Bajaj, some people are already paying capital gains tax on bitcoin revenue, and the law is “quite explicit” that the rate would be the same as it is for other services when it comes to the Goods and Services Tax (GST).

“We will take a call. I understand that already people are paying taxes on it. Now that it has really grown a lot, we will see whether we can actually bring in some changes in law position or not. But that would be a Budget activity. We are already nearing the Budget, we have to look at that point of time,” In an interview Bajaj stated.

When asked if a TCS (Tax collected at Source) provision might be implemented for crypto trading, the Secretary responded, “If we come up with a new law, then we’ll see what we can do.”

“However, if you earn money, you must pay taxes… Some have viewed it as an asset and paid capital gains tax on it, therefore we’ve already paid some taxes “he stated

When asked if anyone active in cryptocurrency trading would be classified as facilitators, brokers, or trading platforms, and if so, how would GST taxes work, Bajaj stated “Such features would already be available in other services. As a result, whichever GST rate they are subjected to would apply to them.”

“They must complete the registration process. The GST law is fairly straightforward. GST will be applied if there is an activity, such as a broker assisting customers and charging a brokerage fee “he stated

Separately, the government is expected to submit a measure on cryptocurrencies during Parliament’s Winter Session, which begins November 29, in response to worries that such currencies are being exploited to deceive investors with false claims.

Notably, in recent times, there have been an increasing number of adverts, some starring even movie stars, promising easy and big profits on cryptocurrency investments.

There is currently no rule or prohibition in place in the country regarding the usage of cryptocurrencies. In light of this, Prime Minister Narendra Modi met with senior officials last week to discuss cryptocurrencies, and there are signs that tough regulatory measures may be enacted to address the issue.

The Parliamentary Standing Committee on Finance met with several stakeholders and experts earlier this week, marking the panel’s first meeting on bitcoin and associated problems. The panelists emphasized the need for cryptos to be regulated, but did not fully dismiss them.

Members of the Parliamentary subcommittee reportedly expressed a desire for government officials to appear before them and explain their concerns. There was agreement that bitcoin should be regulated by a regulatory structure. Who should be the regulator was a point of contention among industry organizations and stakeholders.

MPs have expressed concerns about the safety of investors’ funds.

In recent years, India has had a tumultuous relationship with digital currencies. It effectively prohibited crypto transactions in 2018 after a run of frauds followed Modi’s abrupt move to abolish 80% of the country’s currency, but the restriction was overturned by the Supreme Court in March 2020.

The mania in India has risen at a frenetic rate after the Supreme Court rejected the RBI’s judgement, thus lifting the restriction on cryptocurrency trading in India.

Following this, on February 5, 2021, the central bank established an internal panel to develop a digital currency paradigm.

Under the chairmanship of Secretary (Economic Affairs), an inter-ministerial council on cryptocurrency advised that all currencies save those issued by the government be prohibited.

The Reserve Bank of India has often stated its opposition to cryptocurrencies, claiming that they pose a severe threat to the country’s macroeconomic and financial stability. It has also questioned the number of investors trading on them, as well as their alleged market value.

According to several sources, the government is considering banning cryptocurrencies from being used for transactions or payments, but allowing them to be retained as assets similar to gold, stocks, or bonds.

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