5 tax rules that Budget 2022 could impose on cryptocurrencies
There is no law on the books in India that controls, restricts, or outright bans the purchase, sale, or exchange of virtual currencies. As a result, it is not against the law to engage in the trading, buying, dealing, or mining of cryptocurrencies or to operate a cryptocurrency exchange.
If the Indian government does not outright ban cryptocurrency trading, it may put a very regressive tax system on the industry. Cryptocurrencies should be taxed in the following manner, taking into account the market size, the quantity, and the risk involved.
The Income-tax Act of 1961, specifically Section 2(14), may classify cryptocurrencies as capital assets if they are bought by taxpayers for investment purposes. Because of this, any bitcoin profit you calculate with the bitcoin profit calculator will be treated as capital gains.
On the other hand, if the taxpayer engages in considerable and frequent cryptocurrency transactions, it is reasonable to infer that the taxpayer is engaged in cryptocurrency trading. In this instance, cryptocurrency sales proceeds are treated as business income and subject to taxation as such.
Provisions for Income Tax withholding and Payment of Other Taxes
The government is strongly encouraged to implement new TDS and TCS laws on the sale and purchase of cryptocurrencies in order to track the monetary activity of those involved in the market and taxes on crypto exchange.
The cryptocurrency marketplaces that facilitate the buying and selling of digital currencies should be required to deduct and collect taxes on behalf of the government. The government should create a level below which such deductions and tax collections are not required, protecting the interests of small investors.
Substantial Formatting Time (SFT) Reporting
To facilitate the reporting of major financial transactions to the Income Tax Department, the Statement of Financial Transaction (SFT) was created. It is suggested that cryptocurrency purchases and sales be included in the scope of reporting in the Statement of Financial Transactions. Similar reporting occurs when trading businesses buy and sell shares or units of a mutual fund.
Steeper tax rate
There has to be a higher tax rate on crypto profits implemented by the government. To level the playing field with other forms of gambling, such as the lottery, game shows, riddles, etc., the profits from the sale of cryptocurrencies should be subject to a 30% tax rate.
Allowing a loss to be deducted from other sources of income
The value of a cryptocurrency may change rapidly and without warning. For these reasons, and to deter investment in virtual currencies, the government should not permit the offset of cryptocurrency trading losses against other revenue for taxes on crypto exchange. Furthermore, it shouldn’t let you deduct cryptocurrency losses from future cryptocurrency profits.
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