Crypto Tax: Government Calls on Experts to Tax Crypto Assets Held by Businesses and Family Offices

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The government has sought advice from tax experts on disclosure and tax guidelines for businesses and family offices that hold cryptocurrencies, two people with knowledge of the matter said. If You Own Cryptocurrencies, Here’s Why Budget 2022 Will Really Matter To You

In the next budget, the government is looking to refine the definition of income and gains for crypto-assets. He also sought advice from experienced tax advisers on whether income from trading or investing in cryptocurrencies could be treated as business income versus capital gains. How will this decision impact investors, exchanges, and crypto businesses? ET’s Sachin Dave with details.

Companies must currently disclose any holdings or transactions of cryptocurrencies or crypto assets in their filings with the Registrar of Companies (RoC). One of the interviewees said that the government could clarify the tax implications of such investments in the next budget.

Most companies that hold cryptocurrencies on their books offer them as income (mainly business income), but since there is no clarity on taxation, it is really difficult to calculate the actual income and how to deal with them, tax experts said.

“There are businesses and family offices that have multiple transactions over the course of the year, and reconciling becomes a really difficult process. business also requires clarity,” said Yashesh Ashar, tax partner. consulting firm Bhuta Shah & Co.

It is unlikely that losses from investing or trading can be offset by regular profits, as these are “speculative transactions”.

“There are already regulations around holding cryptocurrencies on the books of companies or family offices, and it makes sense to have regulations around disclosure and taxation. Many early investors have made substantial gains in the cryptocurrencies and they could also benefit if the government steps in with a framework on whether it will be long-term or short-term capital gains,” said Siddharth Sogani, founder of CREBACO, a research firm on cryptocurrencies.

Tax experts have pointed out that companies report and apply tax on their cryptocurrency income differently due to regulatory confusion.

“There could be three types of businesses that would be exposed to cryptocurrencies, firstly those that are dedicated to crypto assets, secondly those that may have only invested in cryptocurrencies, and thirdly, businesses that accept payments in cryptocurrencies the sale of investments in crypto should be treated as capital gains, while income from trading in crypto or when consideration for the sale is received in crypto should be treated as ordinary business income of the company,” said Sudhir Kapadia, National Tax Manager, EY India.

The ambiguity is also due to the nature of cryptocurrency, tax experts say. It is still undefined whether cryptocurrency is a currency, an asset or a commodity. Tax rates and how businesses deal with them would depend on it, experts say.

The new regulations could also mean that companies and even family offices will have to declare not only Indian assets, but also those outside India to the RoC as well as the tax service.

The government is only providing tax-related clarifications and is not looking to roll out a separate cryptocurrency bill in the upcoming budget, ET reported on January 12.

The government is considering changing current income tax and budget disclosure rules to include cryptocurrency, ET reported earlier on December 4.

The government wants to capture cryptocurrency revenue and investment inside and outside India, two people with knowledge of the development said, according to ET’s December report.

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