The government had mentioned earlier that there would be no outright ban on cryptocurrencies; however, no clarity was provided on how the government plans to handle virtual coin trade in India.
There needs to be more clarity if cryptocurrencies have to be considered as services, commodities, or similar to equities; only then virtual coins can be regulated or taxed. This is the reason the government is aiming to define cryptocurrencies via a draft bill. By defining cryptocurrencies clearly, it will be easy to outline how they need to be taxed and regulated in the future.
The government will likely develop a draft cryptocurrency bill that will talk about the definition of virtual coins; how these coins will be regulated and taxed. It has been anticipated that the new bill will outline the tax treatment of digital assets and define how digital assets will be classified.
This move has come at a time wherein the cryptocurrency trade is booming in India rapidly. Domestic cryptocurrency exchanges have witnessed an acute increase in trading volumes. Hence, they requested the government to regulate the virtual coin trade versus imposing a ban.
Cryptocurrency exchanges have mentioned several times that there is a need for considering cryptocurrency tokens as digital assets versus currencies, and consequently, define policies related to crypto trade.
Currently, in India, there is no legal status for cryptocurrency, and it remains unregulated. The draft crypto bill could define the virtual coin trade’s future in India.
The draft cryptocurrency bill may classify cryptocurrencies depending on the technology they use. However, the primary focus will be to categorise depending on the assets’ end-usage concerning regulatory purposes. This move will probably benefit you as a cryptocurrency investor as this move will introduce the much-awaited concrete law that would regulate virtual coin trading.
There is also anticipation that the draft cryptocurrency bill might also determine how taxes will be imposed on cryptocurrency investments. The new crypto bill will assist authorities in registering cryptocurrency trade under tax and in the books of accounts accordingly. Nevertheless, the government might not permit settlements and payments via virtual currencies in its bill.
For any clarifications/feedback on the topic, don’t hesitate to get in touch with the writer at bhavana.pn@cleartax.in
Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.
