Amidst the Covid pandemic, cryptocurrencies and other digital currencies have grabbed headlines across the World. As experts say, India can follow in the footsteps of Dubai. Which is the global crypto-hub owing to its lenient and supportive government. But there is relatively high backlash from the government regarding the adaptation of the new tech. So, the question of the hour is, should the government term Crypto Investment as Business Income Or Not?
Suppose you are someone who invests or trades in cryptocurrencies. In that case, you might be aware that currently, since cryptocurrency doesn’t fall in the asset, currency, commodity or service category, there is no clarity to apply direct or indirect taxes on them.
The Indian government has recently decided to approach senior tax advisors and take their opinion to treat the income earned from trading or investing in cryptocurrencies as business income as against capital gains from the current year onwards.
They’ll also discuss changes that will only impact crypto assets and not asset classes, including equities.
In case it is termed as business income then crypto investors have to bear extra tax. Income tax on returns for traders or investors could soar up to 35% to 42%. This could be a bit of grim news to them.
Expert Views On Crypto Investment Terminology
Dinesh Kanabar, CEO of a tax advisory firm, Dhruva Advisors, said that if the definition of income changed, it could allow India’s tax department to charge income tax on any money gained from investing and trading in cryptocurrencies.
This would affect long time investors too who have not withdrawn any amount. Additionally, you’re liable for paying tax every time you sell or buy crypto assets. Which is something ludicrous.
This rule would be applied because whenever any payment is made using cryptocurrency, it is assumed that the recipient is earning an income to be taxed separately.
The chances are that an 18% GST bracket would be set for the crypto trade as suggested by Sudhir Kapadia, national leader-tax of EY India. At the same time, there’s also a possibility of GST being much higher for those holding crypto assets he added.
The government is also planning to include cryptocurrencies as a commodity in the new draft bill.
However, the government won’t take any immediate steps. The government is waiting for US Policies which will take shape in the next couple of months.