India’s pre-budget expectations to classify cryptocurrency as an asset

The cryptocurrency market is growing. As of 2021, India ranks first in total cryptocurrency investments. More than 33 million Indians have currently invested in cryptocurrencies. The investment includes Bitcoin, Ethereum, and Polkadot amongst others. By 2030, this investment may reach $240 million.

Crypto code of conduct in India

Leading crypto exchanges including CoinDCX, WazirX, and CoinSwitch are working on a code of conduct. This will come in handy to undertake crypto transactions. Blockchain and Crypto Assets Council has come forward to act as a self-regulatory agency. This agency will work on finalizing the code of conduct. This move comes in the absence of proper regulations on cryptos in India. It is also advised that crypto exchanges and other selling platforms need to add banners and other warning signs while handling cryptos. Considering the volatility of the market, it is important to ensure that every new investor is aware of these market risks. Guidelines and procedures were developed to ensure consumer transactions, investments, and fund are secure. The code of conduct as developed by BACC will work as guidelines. And applicable for investors and exchange agencies until a regulation is announced.

Expectations from the 2022 budget:

Budget 2022 is round the corner. It is estimated that our Finance Minister Nirmala Sitaraman may present the budget on Feb 1, 2022. The meeting will kick start on January 31 and may last for 02 days. Investment experts across the globe are expecting a positive response on cryptos. In 2021, the cryptocurrency industry came under the direct scrutiny of the Reserve Bank of India and the Centre.

Industry experts have sought support from the Center and RBI to include cryptocurrencies as an asset. The entire industry is waiting for a confirmation on the proposed bill. Regulations in cryptocurrency will also attract more Indians to invest in the same. This regulatory framework needs to cover four important areas of investment –

  • Crypto classification
  • Regulatory framework
  • Standard KYC and
  • Regulator or exchange

TDC and TCS applicability on crypto investments

Crypto market experts think to levy TDS/TCS on cryptocurrency. This is applicable while buying and selling crypto assets. This will also enable the government to amend the existing tax slabs. Taxes may be applicable on cryptos after a certain threshold. All such transactions will be brought under central bank review. For taxation, investors need to declare the total cryptos held. Basis capital gain declared; income tax will be applicable on these cryptos.

There are other industry experts also speculating that the central government can start issuing cryptos. This will allow crypto to be named as crypto assets rather than cryptocurrencies. Taxation on cryptos will allow for minimizing market volatility. The upcoming budget can focus on regulating the crypto industry. And focus on classifying crypto as an asset class. Once this classification is completed, regulatory agencies can then go ahead with imposing tax regulations as applicable.

Supreme court judgment on crypto

The Indian government was all set to introduce a bill on cryptocurrency in the Parliament winter session. But, this project was put on hold. Post this, Finance Minister had agreed that the crypto industry cannot be ignored and regulations to this front are expected. The government had earlier banned crypto investments. But, this ban was overruled by the honorable Supreme Court of India. This ban also suggests a hopeful boost to this industry in the coming years.

GST implication on cryptos

Industry experts think that GST may be imposed on crypto gains. Like discount brokers, crypto exchanges can also include GST implications. Income from crypto can be taxed by taking a similar approach to that of stock trading. There is also a positive approach by the government and expect cryptos to come under the tax radar.

The industry looks positive about cryptocurrencies. There is an increasing interest in blockchain technology and cryptography. New regulations will also pave way for newer investments. There will be confidence amongst investors including individuals and institutions. Another advantage will be on having this regulated as an asset class. New regulations by the Indian government will allow precedence to be set globally.

Most exchanges in India are indeed under the constant radar by regulatory agencies. This move comes as a next step to the growing interest of investors in India.

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Andrew Naughtie

News reporter and author at @websalespromo