Cryptocurrency: In the upcoming budget, the government may consider imposing TDS/TCS on sale and purchase of cryptocurrencies above a certain limit and such transactions should be brought under the ambit of specific transactions for the purpose of reporting to income tax authorities, said Arvind Srivatsan of the Tax Department. Leader and Partner, Nangia Anderson LLP.
Additionally, a higher tax rate of 30% should be levied on income from the sale of cryptocurrency, similar to winnings from game shows, lotteries, puzzles, etc., he told PTI.
Talking about what the upcoming Union Budget 2022-23 could have in store for India’s crypto owners on 1 February, Srivats said that currently, the country has the highest number of crypto owners globally at 10.07 crore and according to a report, it will have the largest number of Indians in cryptocurrencies by 2030. Investments are expected to touch $241 million.
“A bill to regulate cryptocurrency was expected to be introduced during the winter session of Parliament. However, it was not introduced, and it is now expected that the government may take up the bill in the budget session. If the government does not ban Indians. By dealing in cryptocurrency, we expect that the government may introduce a regressive tax system for cryptocurrency,” he noted.
He said that considering the size of the market, the amount involved and the risk associated with cryptocurrencies, certain changes may be brought in the taxation of cryptocurrencies such as bringing them under the provisions of tax deducted at source (TDS) and tax collected at source (TDS). (TCS) is above a threshold limit that will help the government get “investor footprints”.
Both sales and purchases of cryptocurrencies should be covered by reporting in the Statement of Financial Transactions (SFT).
Trading firms already report the same for sale and purchase of shares and units of mutual funds, he said.
To keep track of high value transactions done by the taxpayer, the Income Tax Act has the concept of SFT or Reportable Account.
This helps the tax authorities to collect information on certain defined high-value transactions carried out by any person during the year.
Financial institutions, companies and stock market intermediaries fall under the purview of SFT reporting. Srivatsan said that income from the sale of cryptocurrencies, like winnings from lotteries, game shows, puzzles, etc., should be charged a higher tax rate of 30 percent.
Ahead of the winter session of Parliament that ended on 23 December, the government listed to introduce a bill on the regulation of cryptocurrency. The bill comes amid concerns that such currencies are allegedly being used to lure investors with misleading claims.
Separately, the government is mulling changes in the Income Tax Act to bring cryptocurrencies under the tax net and some changes that could be part of the 2022-23 budget.