The union government is planning changes in the income tax laws to bring cryptocurrencies under the tax net, with some changes that could form part of the Budget next year, Revenue Secretary Tarun Bajaj told news agency PTI.
Bajaj said that in terms of income tax, some people are already paying capital gains tax on the income from cryptocurrency, and in respect of Goods and Services Tax (GST) also the law is “very clear” that the rate would be applicable as those in case of other services.
“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,” Bajaj told PTI in an interview.
Asked if a provision of TCS (Tax collected at Source) could be introduced for crypto trading, the Secretary said “if we come up with a new law then we will see what is to be done”.
“But yes, if you make money you have to pay taxes… We have already got some taxes, some have treated it as an asset and paid capital gains tax on it,” he said.
Asked whether people involved in cryptocurrency trading would be categorized as facilitator, brokerage and trading platform and how the taxation would be done under GST, Bajaj said “there would already be such things available in other services also. So whatever GST rate they are taxed at, that will be applicable on them.”
“They have to get themselves registered. The GST law is very clear. If there is an activity, if there is a broker who is helping people and charging brokerage fee, GST would get charged,” he said.
Separately, the government is likely to introduce a bill on cryptocurrencies during the Winter Session of Parliament beginning November 29, amid concerns over such currencies being allegedly used for luring investors with misleading claims.
Notably, there have been a rising number of advertisements, featuring even film stars, promising easy and high returns on investments in cryptocurrencies in recent times.
Currently, there is no regulation or any ban on use of cryptocurrencies in the country. Against this backdrop, Prime Minister Narendra Modi, last week, held a meeting on cryptocurrencies with senior officials and indications are that strong regulatory steps could be taken to deal with the issue.
Earlier this week, the Parliamentary Standing Committee for Finance has met various stakeholders and experts, a first for the panel on cryptocurrency and related issues. The panel stressed on regulation of cryptos but not completely shutting the door on them.
The members of the Parliamentary panel are said to have wished for govt officials to appear before it and address their concerns. There was a consensus that a regulatory mechanism should be put in place to regulate cryptocurrency. Industry associations and stakeholders were not clear as to who should be the regulator
The MPs have expressed concerns over security of investors’ money.
India has had a hot-and-cold relationship with digital currencies in the past few years. In 2018, it effectively banned crypto transactions after a string of frauds following Modi’s sudden decision to eliminate 80% of the nation’s currencies, but the Supreme Court struck down the restriction in March 2020.
After Supreme Court overturned the RBI’s order, which effectively lifted the ban on cryptocurrency trading in India, the craze in the country has grown at a furious rate.
Following this in February 5, 2021, the central bank had instituted an internal panel to suggest a model of central bank’s digital currency.
An inter-ministerial panel on cryptocurrency under the Chairmanship of Secretary (Economic Affairs) had recommended that all currencies except those issued by the state should be banned.
The RBI has repeatedly reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well their claimed market value.
A possibility that is being explored in the government is that cryptocurrencies may be barred for the use of transactions or making payments, but allow them to be held as assets like gold, shares or bonds, according to various reports.
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