The government is drafting a new bill to define cryptocurrency and proposes to compartmentalise virtual currencies on the basis of their use cases, writes The Economic Times.
ET’s sources said that only the cryptocurrencies that are covered under the government’s definition will be allowed to be traded in India and taxed accordingly.
The government could apply something similar to security transaction tax (STT) on the trading of cryptocurrencies as well, sources said.
Apart from that, if crypto assets are categorised as commodities, the returns could be taxed as business income in the hands of the investors on the returns at normal income tax rates.
Cryptocurrencies will be treated as an asset/commodity for all purposes, including taxation and as per user case — payments, investment or utility.
ET had recently reported that crypto exchanges had made policy recommendations for regulating cryptocurrencies, including defining cryptocurrencies as digital assets and introducing a system to register home-grown exchanges.
They had suggested that India needs to recognise crypto tokens as digital assets, rather than currencies, and clarify policies in regards to exchange ownership parameters, KYC, accounting and reporting standards, among others.