Modi government mulls bringing crypto under tax net

New Delhi, January 16

After shelving a law to regulate cryptocurrencies, an attempt to bring them under government’s gaze by taxing them is again on the cards.

The government is looking at taxing cryptocurrencies as a whole or at one of the three stages — mining or when it is created; used as a capital asset; or when used for a transaction. The broad consensus is to tax it under the head “Income from other sources” for transactions and charge capital gains tax on its trading.

The endeavour is proving to be much harder than earlier thought. The first attempt was made in the 2018 Union Budget but never followed through as the Supreme Court began hearing a case in this regard. A year later, it asked the government to frame crypto-currency regulation policies which may now be introduced in the forthcoming Budget session.

Taxing rather than banning cryptocurrencies is considered a better option for India, which has the highest number of crypto owners, mainly youngsters, though the cumulative investment is modest.

Finance Minister Nirmala Sitharaman has already said “the government will take measures to eliminate use of crypto assets in financing illegitimate activities or as part of the payment system. The focus, however, would be on the distributed ledger system or blockchain technology that allows organisation to record and authenticate transactions without the need of intermediaries.”