2022 budget: the budget could consider levying TDS/TCS on crypto trading, making it reportable in SFT

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New Delhi: The government may consider in the next budget to levy TDS/TCS on the sale and purchase of cryptocurrencies above a certain threshold and these transactions should be incorporated under a transaction specified in the reporting purposes to tax authorities, Nangia Andersen LLP said Chief Tax Officer Aravind Srivatsan. Also, a higher tax rate of 30% should be levied on income from the sale of cryptocurrency, similar to winnings from lottery, game shows, puzzles, etc., he said. .

Speaking to PTI on what the 2022-23 budget, which will be unveiled by the government on February 1, could hold for the crypto industry in India, Srivatsan said currently, India has the highest number of crypto owners in the world, at 10.07 crore and according to a report, Indian investment in cryptocurrency is expected to reach $241 million by 2030.

“A bill was due to be introduced in the winter session of Parliament to regulate cryptocurrencies. However, it has not been introduced, and the government is now expected to take up this bill during the budget session. If the government does not ban Indians from dealing in cryptocurrencies, we expect that the government can introduce a regressive tax regime for cryptocurrencies,” he noted.

He said that given the size of the market, the amount at stake and the risk associated with cryptocurrencies, certain changes could be made to the taxation of cryptocurrencies, such as subjecting them to the withholding tax provisions of the source (TDS) and tax collected at source (TCS) above a threshold limit which will help the government to obtain the “fingerprints of investors”.

The sale and purchase of cryptocurrencies must be subject to reporting in the financial transaction record (SFT).

Trading companies already do similar reporting on the sale and purchase of mutual fund stocks and units, he said.

To monitor high value transactions undertaken by the taxpayer, the income tax law has the concept of SFT or reportable account.

This helps the tax authorities to collect information about certain prescribed large value transactions made by any person during the year.

Financial institutions, corporations and stock market intermediaries fall within the scope of SFT reporting. Srivatsan said that similar to winnings from lottery, game shows, puzzle games, etc., a higher tax rate of 30% should be levied on income from the sale of cryptocurrency.

Ahead of the winter session of parliament that ended on December 23, the government had listed a cryptocurrency regulation bill for introduction. The bill comes amid concerns over the alleged use of these currencies to lure investors with misleading claims.

Currently, there are no regulations or bans on the use of cryptocurrencies in the country.

The “Cryptocurrency and Official Digital Currency Regulation Bill” is now expected to be introduced in the budget session of Parliament from January 31.

Separately, the government is considering changes to income tax laws to bring cryptocurrencies into the tax net, along with some changes that may be part of the 2022-23 budget.

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