Returns on investment in crypto assets may attract as much as 30% tax even as there is no clarity on whether it is capital gains or business income, according to a report.
Cryptocurrencies have been gaining popularity among investors, particularly millennials. Many investors have earned handsome returns too. The Economic Times reported that the money has come back to investors’ bank accounts from crypto wallets or other channels and it is unlikely to escape the attention of tax authorities.
As it is reported in the media that the government is looking at regulating trading in crypto assets, investors have been reaching out to experts to know about tax implications, the report said.
The Economic Times quoted Sudhir Kapadia, national leader-tax at EY India, as saying that the rules governing taxation of securities as capital gains versus business income would apply in respect of cryptocurrency assets held by individual investors.
If the frequency and number of transactions is high, tax authorities may be inclined to treat it as business income, he added.
The Centre may adopt a middle-of-the-road approach to crypto, that is, it may allow crypto asset trading under strict regulations, while banning use of virtual currencies for payments and transactions. The government is firming up legislation that will enable regulation of crypto assets.
The legislation will address taxes and other issues. The parliamentary standing committee on finance seemed to favour regulation and not an outright ban, according to media reports.
According to The Economic Times report that quotes experts, tax on cryptocurrencies will depend on how the government defines the asset.
Paras Savla, partner at KPB & Associates, is quoted saying that investors want to know whether cryptos are to be treated as assets or goods, tax implication on exchange of one type of crypto currency for another crypto currency, valuation of cryptos, conversion of cryptos into fiat, taxability of consideration received in cryptos by non-crypto businesses, gifts of cryptos, etc.
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