The death of crypto currencies in India is due to the interview with CNBCTV18, the Big Bull Rakesh Jhunjhunwala said that Budget 2022 is the death of cryptocurrencies in India. The reason behind calling it the death is because RBI was made the sole authority to deal with the death of cryptocurrencies. Ideally, the crypto-currencies became popular as it was a decentralised process. There was no government control over the trade in cryptocurrencies and the used case of this blockchain technology was its use as the currency.
However, because of the ever-increasing prices of Bitcoin taxmen across the world got attracted and India is not an exception. This led to the introduction of an explicit tax regime in India.
The New Tax Laws
Here is the snapshot of the taxation related to cryptocurrencies.
- The Finance Minister declared that earnings from the sale of virtual assets will be taxed at a fixed rate of 30%. Also with no exemptions or deductions.
- Any loss incurred as a result of the sale of virtual assets cannot be offset against any other revenue.
- A 1% TDS would be imposed on payments made for the transfer of digital assets.
- Gifts of crypto tokens and virtual assets will be taxed at the same rate in the hands of the receiver.
The new tax laws for virtual assets will have a direct impact on crypto investors. The scale and frequency of virtual digital asset transactions have necessitated the creation of a unique tax system, as noted by the remarkable growth in transactions. This was the justification for imposing a bitcoin tax.
However, there are multiple challenges for those who are using the blockchain and crypto as the tool of product development. It is important to note that every Indian is not just a trader in the death of crypto currencies market.
Is bitcoin legal in India?
Cryptos are a relatively new concept in the Indian market. As they observed that there is death of crypto currencies then at the same time, the imposition of a tax on cryptocurrencies cannot be ruled out. Because Indian income tax regulations have traditionally tried to tax income received regardless of its form. Section 2(47) was used to define it as an asset. But this was not an explicit tax regime.
Though there is a Crypto Currency Bill that is yet to be tabled in the Parliament for discussion, Budget 2022 has given backdoor approval to cryptocurrency. Though the same can not be used as the mechanism of remittance it can be held as an asset. Bitcoin, Altcoins, Tokens or NFTs will never be considered as the legal tender of money. India has followed the footsteps of China in issuing its own cryptocurrency. The Reserve Bank of India will issue the blockchain-based digital version of its Indian Rupee.
Cryptocurrency Mining
Mining produces cryptocurrencies, which are self-generated capital assets. In the ordinary course, subsequent sales of such cryptocurrencies would result in financial gains.
It should be noted, however, that because cryptocurrency is a self-generated asset, the cost of purchase cannot be estimated. Furthermore, it is not covered by any sections in the Income Tax Act of 1961, which endeavoured in defining the cost of purchase of some self-generated assets. Due to Crypto Currency mining a lot death of crypto currencies is taking place. If the cost of acquisition is the only parameter and there is no clarity on how to calculate the cost of acquisition in the case of mining then there are chances that the cost of acquisition would be considered zero.
In such a case the newly mined currencies would leave the country and the purpose of protecting the capital outflow may also be defeated.
It is necessary to have more clarity on the said subject.
What is the GST Impact?
With the tax regime for the overall Cryptocurrency market, it was also expected to have some clarity on the GST aspect. A majority of cryptocurrency exchanges wanted clarification on taxes of revenue derived from crypto-assets and GST regulations imposed on trading platforms. As the death of crypto currencies came near a huge GST impact was observed. There are multiple litigations filed against these exchanges and this issue was left unanswered in the budget.
Because the government does not encourage cryptocurrency trade. A tax rate was also predicted. The gambling business had anticipated it to be handled similarly to the lottery, game show, and puzzle prizes.
Industry players, on the whole, were anxious to get crypto categorized as a legal asset. But it seems possible with precise provisions concerning tax deducted at source (TDS) and tax collected at source (TCS). This is according to opinions provided ahead of the Budget. Perhaps budgetary recognition is a start in the right way.
