Govt could levy TDS/TCS on crypto trading in Union Budget 2022, observes market expert

Building on the cryptocurrency saga in India, Aravind Srivatsan, Tax Leader and partner, Nangia Andersen LLP has now said that the government could consider levying tax deducted at source (TDS)/tax collected at source (TCS) on sale and purchase of cryptocurrencies above a certain threshold in the upcoming Union Budget 2022. He stated that such transactions should be brought within the ambit of specified transaction for the purpose of reporting to income tax authorities. Furthermore, he added that the income raised from the sale of cryptocurrency should have a higher tax rate.

Srivatsan said that the income from cryptocurrency sales must be levied a tax of 30%-- similar to winnings from the lottery, game shows, puzzles, etc. Speaking to PTI about the Budget 2022-23, Srivatsan reiterated that India has the highest number of crypto owners globally, at 10.07 crore. He also added that the investment by Indians in the crypto market could go up to $241 million (Rs 17,893.88 crore) by 2030, as per a report. He said that the new Budget, which will be unveiled by the government on February 1, could have big revelations in store for the crypto industry in India.

'Expect the government to introduce a regressive tax regime for crypto'': Srivatsan

"A bill was expected to be presented during the Winter Session of Parliament to regulate cryptocurrencies. However, it was not introduced, and it is now expected that the government may take up this bill in the Budget Session. If the government does not prohibit Indians from dealing in cryptocurrencies, we expect that the government could introduce a regressive tax regime for cryptocurrencies," Srivatsan noted.

Furthermore, he added that the amount involved in the market, coupled with the risk, could see certain major changes come in the setup. He stated that changes in the taxation of cryptocurrencies like bringing them under the provisions of tax deducted at source (TDS) and tax collected at source (TCS) above a threshold limit will help the government get the "footprints of the investors" and could happen in the Budget. He added that both the sale and purchase of cryptocurrencies should be brought under the ambit of reporting in the Statement of Financial Transactions (SFT).

Crypto regulation bill expected to roll out in upcoming Budget Session

The observations from the market expert came in the light of the 'Cryptocurrency and Regulation of Official Digital Currency Bill' being readied to be presented.

According to reports, the bill is now expected to roll out in the Budget session of Parliament beginning January 31. Meanwhile, the government is also mulling changes in income tax laws to bring cryptocurrencies under the tax net, which could be a major part of the Union Budget 2022.

(With inputs from PTI, Image: Shutterstock)