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Experts exhort Centre to regulate crypto trades
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SME Times News Bureau | 27 Jan, 2022
Even as Union Finance minister Nirmala Sitharaman is set to present the
annual Budget on February 1, experts have called for regulation of
cryptocurrencies and exhorted the government to treat them as capital
assets with a "reasonable" tax regime.
While the sector
has grown exponentially over the last few years in India with buying,
selling of the digital currencies and altcoins and establishing
cryptocurrency exchanges being legal, the government is yet to bring in a
law that regulates the sector.
The government was expected to
introduce a Bill titled "The Cryptocurrency and Regulation of Official
Digital Currency Bill, 2021" to regulate cryptocurrencies in the Winter
session of the Parliament but did not do so. It is now expected to be
tabled in the Parliament during the Budget session that starts on
January 1 and ends on April 8.
Pratik Gauri, CEO, and Founder,
5ire said the government has a responsibility to protect people from
investments that are sensationalized, and while risk-taking is every
investor's right, a measured hand where investment and holding parties
responsible go hand-in-hand.
"Laissez-faire has never worked in
populations where every rupee is hard-earned and we are a nation of
hard-earners. Even in terms of governance, the Indian government is
looking long and hard at accountability. So, taxation and regulation of
investment falls under its purview and I think, thus far the government
has done a remarkable job of balancing the need to encourage investment
for innovation and the restriction on gaining from wild speculation," he
said.
He added that all gains from cryptocurrencies are taxed
heavily across the globe and that asking to pay a fair share of taxes on
the gains in crypto markets is just part of the puzzle.
Prime
Minister Narendra Modi, while virtually addressing a summit of the World
Economic Forum on January 17, had called for a synchronized global
action to regulate cryptocurrencies. The Reserve Bank of India has
publicly favored a ban on private cryptocurrencies. The crypto assets in
India are currently estimated at around Rs 45,000 crore with about 15
million investors.
The risk in the widespread adoption of crypto
is that poor AML and fraud practices are heavily present in the crypto
exchange market. The reasons are multifold: Enhanced Due Diligence (EDD)
is not required on crypto exchanges or ATMs at this time.
Raj
Kapoor, Founder - India Blockchain Alliance and Chief Growth Officer at
Chainsense LTD, said an alignment with the FATF framework would also
provide crypto for a clearer framework on performing AML compliance, and
to prepare to use this to inform your risk assessment and procedures.
The
Customer Due Diligence (CDD) scanner to detect customer identification,
especially for scanning high-risk customers would then be in place as
well.
Ravi S. Raghavan, Partner, Tax and Private Client Group at
Majmudar & Partners says cryptos should be treated as capital assets
and reasonable tax regime such as a levy of 18 per cent GST on fee
collected by exchanges for enabling buying and selling cryptos; and
Investor profits to be either taxed as - short term capital gains (for
cryptos held for less than 36 months) at 30 per cent; or long term
capital gains tax (for cryptos held for more than 36 months) at 20 per
cent that is similar to trading and investment in securities.
"Reporting
procedures in income tax returns and whether tax withholdings are
applicable (beyond prescribed thresholds) should be explained in the
form of an FAQ by the Central Board of Direct Taxes in due course to
avoid any tax litigation," he said.
He added that crypto trading
should be considered by the government as speculative transactions and
no losses arising from crypto sales be allowed to be carried forward and
set off against other business profits or salary income of the
concerned taxpayer.
Regulating cryptocurrencies by bringing it
under the IT Act will make it a part of the investment choices and while
most investors do not have a problem with taxation, they seek clarity
and consistency of taxes.
"Anything that is banned never goes
away, it just goes underground and the govt misses out on the tax
revenues. Also regulating it would ensure that all loopholes are plugged
and people don't feel the need to evade taxes," Kunal Verma director
and creative head of Yunometa Pte limited said.
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As on 13 Aug, 2022 |
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