The government is considering changes in the Income Tax Act to bring gains made from transactions in cryptocurrencies under the tax net in the Budget next year. It is also looking at imposing goods and services tax (GST) on the trade in virtual currencies.
People are already paying capital gains on income from cryptocurrencies, and the GST law provides for taxing such transactions as ‘services’, Revenue Secretary Tarun Bajaj told PTI.
Investments in cryptocurrencies have surged lately with expectations of higher returns. These currencies have also gained wider acceptance among youth.
The tax department’s view has been that taxing such “intangible” assets won’t mean that trading in them will be legitimised. “We will take a call. I understand that already people are paying taxes on it. Now that it has really grown a lot, we will see whether we can actually bring in some changes in law position or not. But that would be a Budget activity. We are already nearing the Budget; we have to look at that point of time,” Bajaj said.
The revenue department is also examining if cryptocurrency exchanges can be classified as e-commerce platforms and imposed 1 per cent tax-collected at source (TCS).
Responding to a query whether TCS provisions could be introduced for crypto trading, Bajaj told PTI “if we come up with a new law, then we will see what is to be done”. “But yes, if you make money you have to pay taxes…We have already got some taxes. Some have treated it as an asset and paid capital gains tax on it,” he added.
The government is also looking at classifying cryptocurrency exchanges into three categories: Those that act as a facilitator, brokerages that allow buying and selling, and trading platforms that provide an interface for trading, Business Standard reported earlier.
Asked whether people involved in cryptocurrency trading would be categorised as facilitator, brokerage and trading platform and how the taxation would be done under GST, Bajaj told PTI that “there would already be such things available in other services also. So whatever GST rate they are taxed at, that will be applicable to them. They have to get themselves registered. The GST law is very clear. If there is an activity, if there is a broker who is helping people and charging brokerage fee, GST would get charged,” he said.
Separately, the government is also planning to introduce a Bill on cryptocurrencies during the Winter Session of Parliament beginning November 29, amid concerns over such currencies being allegedly used for luring investors with misleading claims.
Last week, Prime Minister Narendra Modi chaired a meeting on cryptocurrencies, and noted that attempts were being made to mislead youth by over-promising and non-transparent advertising, and should be stopped.