Three individuals who are aware that the development is being said ET are planning to define cryptos in the new draught bill which also proposes to divide virtual currencies into their use cases.
For all purposes, including taxation and for each user’s sake — payments, investment, or utility, cryptocurrencies will be treated as an asset/commodity.
Govt Plans to Produce a Bill To Treat Cryptos as a Commodity
This is the first time cryptos are classified according to the technology they are using, but the government’s emphasis is on the end-use of the asset for regulatory purposes, according to sources.
The bill should also outline the tax treatment of these assets, to be placed clearly in the account books.
“The government in its draft bill is working towards defining cryptocurrency and its treatment in various use cases so that it can be treated correctly in the books of accounts plus it should be taxed in the right manner,” a person in the know said. “It is not looking to allow payments and settlements through virtual currencies.”
Nobody knows whether the money, commodity, service, or closer to equity, for tax purposes or for other purposes, is the crypto-asset.
This is an insufficiency in the law, as the ambiguity of how to tax or regulate an asset becomes an issue unless the property is defined.
The government is looking to first define cryptocurrency, according to people who are close to the development.
“Crypto-assets can be either categorized on the basis of the technology they use or they can be defined on their end-use. So, before talking about how the regulations should work, the government has to spell out what it means by cryptocurrencies,” said a person aware of the development.
ET recently reported that crypto-exchanges have recommended policies on the regulation of cryptocurrencies, including the definition as digital equipment of crypto-currencies and the introduction of home-grown trading registrations.
They suggested that India should recognize crypto-tokens instead of currencies as digital assets and clarify policy with regard to, among other things, exchange ownership, KYC, accounting, and reporting standards.
“There are more than 5,000 different cryptos, each with its own different legal characteristics. Therefore, rather than the cryptocurrency technology alone, regulation should be tailored according to the end-use or activity of a particular token,” said Jaideep Reddy, leader – technology law at law firm Nishith Desai Associates.
People in this area said that it is possible in India to trade only the cryptos covered by the government’s definition.
Then these crypto assets will be subject to taxation, people who know about the development said.
Furthermore, the returns could be taxed as business income, where crypto-assets are categorized as commodities, on returns at normal tax rates, in the hands of investors.
The Indian Reserve Bank (RBI) in the past had flagged cryptocurrencies issues.
Source: The Economic Time