By Linus Garg
First publised on 2022-02-02 07:15:00
The Union Budget 2022 has showed a peculiar ambivalence towards cryptocurrencies and non-fungible tokens (NFTs). On the one hand, it has sought to levy a 30% tax on gains arising out of sale or transfer of crypto assets without allowing any deductions on the transactions and has also levied a 1% TDS on payouts from crypto platforms, it has not spelled out the legal status of crypto transactions, thereby keeping lakhs of investors in India on the tenterhooks. It has also provided that losses arising out of crypto transactions will be allowed to be set off from income from these assets only and not from any other income.
Although it is a settled principle of law that the legal status of an income earned does not have a bearing on its taxability, still when an emerging technology is being used to trade in something that remains illegal till a law is made to decide its position and since lakhs of tech-savvy investors are transacting on crypto platforms daily, it was needed that the legal position of crypto should have been addressed, more so as the government has held meetings with stakeholders and has applied its mind to it.
With the announcement that the RBI will use blockchain technology to come up with an official digital currency in the next financial year it can be treated as a pointer that all other forms of crypto will cease to be recognized as legal tender in India. But that will not prevent them from being treated as crypto assets. Perhaps the government is moving in that direction. It will most likely treat crypto as a class of assets and not as currency.
Hence, it is imperative that either before, or simultaneously with the announcement of the RBI digital currency, the government must come out with a comprehensive crypto bill that would spell out the legal status of all private crypto transactions. People are not worried about the tax on gains (although it might pinch). They are more worried about the status of their investments. Hence, the earlier the government clears this issue the better for the lakhs of investors.