The Indian government is planning to issue a set of guidelines before July 1 after making some amendments to the scope and definition of VDAs for effective tax administration of virtual digital assets (VDA). The Central Board of Direct Taxes (CBDT) has been asked to prepare the guidelines, media reports said.
“This is an evolving discussion. We would like to ensure that virtual digital assets include any and every product that is introduced due to technological innovation. We may also exempt certain products,” Business TV Today quoted an unnamed Finance Ministry official as saying.
Relief in Tax Rates Unlikely
According to the source, the government is unlikely to reduce the 1% tax deduction at source (TDS) that applies to virtually all digital asset transfers. It thinks that the TDS will help trace and track people in the crypto trade who may be making profits but are unwilling to show them in their income tax filings.
Some industry representatives, including CoinSwtich Kuber CEO Sumit Gupta, had requested the government to bring down the TDS in the range of 0.01% to 0.05%.
The 30% capital gains tax introduced through the Union Budget 2022-23 on profits from crypto transactions, including those of NFTs, is also unlikely to be reduced.
The Finance Ministry is not planning to offer exemptions aside from some exceptions that might include hospitals using blockchain technology.
Presenting digital assets as gifts on festivals and other special occasions is a growing trend. The new guidelines will likely provide for taxation on such gains, the source said.
No Word Yet on Regulation Timeline
While the taxation policy for the crypto sector has been put in place through the Annual Budget 2022-23, and the basic details for its implementation are being finalized and fine-tuned through the upcoming guideline, there is no official word on the timeline for regulations.
Early this week, a top Finance Ministry official revealed that a consultation paper is “fairly ready” after broad-ranging consultations with industry stakeholders and international agencies such as the IMF and the World Bank. It will be put before the public for their comments and feedback within six months, Ajay Seth, Economic Affairs Secretary in the Finance Ministry, said.
Speaking at the IMF panel discussion and subsequent public events in the US during the 2022 Spring Meeting in April, Indian Finance Minister Nirmala Sitharaman pitched for global crypto regulation and said India won’t take a rushed decision.