In Budget 2022, it was announced that all gains from cryptocurrency transactions will attract a flat 30 per cent tax
As the Union Budget 2023 inches closer, one question on people’s mind is how would the government address the issue of cryptocurrencies. After having launched e-rupee, India’s own central bank digital currency, it is expected that the central government would bring in tighter regulations for cryptocurrencies.
In Budget 2022, it was announced that all gains from cryptocurrency transactions will attract a flat 30 per cent tax. Additionally, one per cent tax deducted at source (TDS) was also announced. Following this, there have been speculations around the kind of regulation that the Indian government wishes to bring forth for cryptos.
In all likelihood, these speculations will be addressed in the upcoming budget. Finance Minister Nirmala Sitharaman has already said in the past that international collaboration is required to rein in cryptocurrencies.
Finder’s Cryptocurrency Adoption Index 2022 estimated that crypto ownership in India is almost double the global average. Considering the high number of crypto users in India and the government’s stance against it, it is likely that Budget 2023 will introduce a regressive tax regime for cryptocurrencies.
Tax advisory firm Taxmann suggests that sale and purchase of cryptocurrencies above the threshold limit to be brought within the TDS/TCS provisions. This can help the government achieve footprints of the crypto investors.
Additionally, bringing in both sale and purchase within the ambit of reporting in the Statement of Financial Transactions is also expected. Taxmann further suggests the prevention of losses from crypto transaction being used to set off other gains.
Losses emerging from cryptocurrency transactions should not be allowed to be carried forward, according to the tax advisory firm.
As India assumes presidency of the G20 summit this year, it is expected that India will take the lead in global crypto regulation. Crypto-related measures that will be announced during Budget 2023 will be a precursor of India’s global stance of cryptocurrencies.