In Brief:
- The Indian government is considering levying TDS and TCS on crypto trading in Budget 2022.
- The purpose is to report income tax authorities on the sale and purchase of cryptocurrencies above a certain threshold.
- A higher tax rate of 30% could be levied on the income generated from crypto transactions.
The Indian government could consider levying TDS and TCS on crypto trading above a certain threshold. According to reports, these transactions might be brought under the tax net in the upcoming Budget 2022.
As reported by Nangia Andersen LLP Tax Leader Aravind Srivatsan, the purpose is to report income tax authorities about specified transactions. Moreover, a higher tax rate of 30% should be levied on the income generated from the sale of cryptocurrencies, similar to the winnings from game shows, lotteries, puzzles, etc.
Srivatsan also said that currently, India has the highest number of crypto owners worldwide, at 10.07 crore. As per a report, the investment by Indians in cryptocurrencies is expected to reach USD 241 million mark by 2030.
The much-awaited crypto bill was anticipated to be presented during the Winter Session of Parliament to regulate cryptocurrencies. However, it was not introduced, and it is now expected that the government may take up this bill in the upcoming Budget Session beginning January 31.
If the government decides not to prohibit Indians from dealing in cryptocurrencies, it is possible that the government could implement a more regressive tax regime for cryptocurrencies.
According to Aravind Srivastan, considering the size of the Indian market, the amount involved coupled with the risk related to cryptocurrencies, certain changes may be brought in the taxation. These changes would form part of the 2022-23 Budget.
He also suggested provisions such as tax deducted at source (TDS) and tax collected at source (TCS) should be introduced for the transactions above a threshold limit. This will help the government get the “footprints of the investors”.
Both sale and purchase of cryptocurrencies are planned to be brought under the ambit of reporting in the Statement of Financial Transactions (SFT). This is to keep closer speculation on the high-value transactions undertaken by the taxpayer, the Income-tax has the concept of SFT or reportable account.
Amid concerns over issues such as currency being allegedly used for luring investors with misleading claims, the government is considering collecting information on certain crypto transactions. For this to happen, the government will execute the income tax laws to bring cryptocurrencies under the tax ambit.