Government is aiming to clearly define the tax, income and gains generated through cryptocurrency.
At the moment, investment in financial offerings is taxed under the Capital Gains Tax regime.
On the other hand, trading is considered as Business Income.
The Government of India is contemplating whether to categorize crypto investments as Business Income, as per a report by Economic Times.
In the case of Short Term Capital Gains Tax, the tax rate applicable to the other incomes earned during the year applies to the Short Term Capital Gains.
But if it is taken as Business Income, the calculation could be different.
Income Tax on Business Income Generated from Crypto
The Government is seeking to clearly define the income and gains generated from crypto assets, in the upcoming budget.
“If the definition of income is changed in the tax framework then it could give leeway to the tax department to charge income tax on any gains accrued from investing and trading in cryptocurrencies. Some clarity as far as taxation is concerned is required around cryptocurrencies even if we don’t have a framework in place defining the asset class.”Dinesh Kanabar, CEO at Dhruva Advisors, a tax advisory firm
Investors whose crypto holdings have appreciated during the assessment period and have traded them for other crypto assets without converting them to Fiat will have their gains taxed.
Money received in crypto assets will also be taxed.
GST on Crypto
Along with this, the Government could also levy 18% Goods and Services Tax (GST) on crypto trading.
A source revealed that individuals would be taxed at 18% and companies dealing in crypto “can show crypto investments in the other income bracket.”
The report also highlights that the Government is planning to define cryptocurrency as a commodity in the long-awaited crypto legislation. The new draft bill will also categorize cryptocurrencies based on their use cases.
But a source has claimed that no such legislation is in the works.
“There is no preparation for the bill; the government is waiting for the US policies to take shape, which are expected in the next 2-3 months. After the US releases its policies on crypto, India is expected to decide its way forward,” a person aware of the matter said.
Taxation is a complex issue that every breadwinner has to tackle. If you are confused about the tax implications of your crypto investments, check out this detailed article which will clear out all your doubt about income tax on cryptocurrencies in India.
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