DESIGN CRYPTO TAXATION

Experts suggest multiple ways to tax cryptocurrencies

INDIA’S CRYPTOCURRENCY market is expected to touch $241 million by 2030, says a recent research report. Though the crypto market has been witnessing sharp growth, tax experts are confused about their taxation in the absence of any specific provisions. There are several issues when it comes to virtual tokens, ranging from method of computing the fair market value, costs, taxable income, and reporting requirements. “It is recommended that a specialised regime for taxation of cryptocurrency be introduced covering, inter alia, provisions dealing with classification of cryptocurrencies (capital asset vs. financial instrument vs. commodity), situations in which cryptocurrencies are taxable in India, head of income for taxation, expenses that can be claimed, income tax rate, and reporting requirements,” says Deloitte India’s Budget Expectations 2022 report. Some suggest that crypto be taxed the way winnings from lotteries are, given the speculative nature of transactions. Taxmann’s report on Budget expectations states, “Similar to winnings from lotteries... a higher tax rate of 30 per cent should be levied on the income arising from the sale of cryptocurrency. Both sale and purchase of cryptocurrencies above the threshold limit should be brought within the ambit of TDS/ TCS provisions.” Tax experts classify crypto gains either as capital gains or income from other sources. “When one sells crypto held as investment, the gains are to be reported as ‘income from capital gains’. If one held crypto for lesser than 36 months, then the gains/losses will be short term and in case it is held for more than 36 months, then the gains/losses shall be long-term,” says Sujit Bangar, Founder, TaxBuddy.com.