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Cryptocurrency Taxation does not necessarily imply legality

Cryptocurrency Taxation does not necessarily imply legality. Let it be clear that just because income tax or GST has been charged on the transaction, it does not by itself make the transaction legitimate. Taxability and legality of transactions are independent of each other -  a senior official at the Finance Ministry recently told The Hindu BusinessLine.

India is reportedly planning a short-term boost to its coffers by ensuring the nation’s cryptocurrency space is taxed before bringing in a ban on such assets.

The government is likely to impose personal income tax (IT) and the goods and services tax (GST) on gains from trading cryptocurrencies and from platform fees, respectively, according to a Wednesday report from Business Standard, one of the largest English-language newspapers in India.

Bitcoin will be categorized as financial services attracting 18% GST on fee commission collected [by exchanges] under this segment. Plus, [income tax] to be paid on the earnings from this,” a senior finance ministry official said. 

According to the newspaper’s sources, authorities aim to collect both taxes for the fiscal year April 2020 to March 2021.

If this is correct news, then this is the first clarification on how the cryptocurrency industry and its users will be taxed, albeit probably briefly until further regulation is in place.

The government is also planning to introduce a cryptocurrency bill in the ongoing session of Parliament, seeking a ban on “private cryptocurrencies,” as well as the formal start of development of a digital rupee to be issued by the central bank. The bill’s contents are still unknown, and the government is yet to define the term “private cryptocurrencies.” India’s Minister of State for Finance Anurag Thakur has said that the impending bill will fill policy gaps.

 
While the government has not specifically declared how crypto gains should be taxed, Nischal Shetty, CEO of Binance-owned WazirX said crypto earnings are taxable like any other income and should be declared in the income tax returns. Shetty added that his exchange has been voluntarily paying GST on trading fees collected from customers.
 
In today’s report, the anonymous official said cryptocurrencies, while unregulated, have not yet been banned and taxation rules apply to all kinds of services and commodities.
 
DISCLAIMER

The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA

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