Income tax

2022 Budget for Cryptocurrency Investors: Changes to Income Tax Rules Set to Be Announced by Finance Minister

If the government does not ban Indians from trading cryptocurrencies, it could introduce a regressive tax regime for cryptocurrencies.

Budget expectations for cryptocurrencies: The Indian cryptocurrency market has grown exponentially over the past few years. Indian investment in cryptocurrency is expected to reach $241 million by 2030. Currently, India has the largest number of crypto owners in the world at 10.07 crores , according to a recent study by Nasscom and WazirX.

“A bill was due to be introduced in the winter session of Parliament to regulate cryptocurrencies. However, it was not introduced and the government is now expected to address this bill in the budget session. If the government does not ban Indians from trading cryptocurrencies, we expect that they may introduce a regressive tax regime for cryptocurrencies,” says Naveen Wadhwa, DGM, Taxmann.

Considering the market size, amount and risk of cryptocurrencies, the following changes can be made to the taxation of cryptocurrencies:

1) FT/TCS Provisions

Tax experts believe that the sale and purchase of cryptocurrencies above the threshold should be subject to the TDS/TCS provisions. This will help the government get the footprint of the investors.

2) Declaration in SFT

The sale and purchase of cryptocurrencies must be included as part of the declaration in the statement of financial transactions. Trading companies already make similar reports on the sale and purchase of stocks and units of mutual funds.

3) Higher tax rate

As with winnings from lottery, game shows, puzzle games, etc., a higher tax rate of 30% should be levied on income from the sale of cryptocurrency.

4) The loss cannot be compensated

Losses resulting from the sale of cryptocurrency should not be allowed to be adjusted from other income, nor should they be allowed to be carried forward.

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