Taxing income from digital assets first step towards regulating new asset class, feel blockchain, crypto players

Taxing income from digital assets first step towards regulating new asset class, feel blockchain, crypto players

By Malini Bhupta

The jury may still be out on whether crypto assets are legit or not, but the blockchain and crypto industry is viewing the finance minister’s move in the Budget as a step towards regulating this new asset class. The Blockchain and Crypto Assets Council (BACC) is of the view that the government’s proposal to tax digital assets is a step in the right direction and takes away some of the ambiguity around the industry.

The industry believes that the regulators had an issue with the term “currency” and the Budget addresses that worry by defining cryptos as digital assets.
According to Sumit Gupta, co-chair, BACC, and co-founder of CoinDCX, “It shows intent to regularise the industry and not ban it. Regulation of crypto is pending, but the government’s move to tax income from it gives it some form of legitimacy. The point on whether it is regulated is a parallel discussion.”

Under the ambit of digital assets, non-fungible tokens (NFT) too will come. Players in this segment have maintained that NFTs were digital goods and they have always been regulated. Says Ankit Wadhwa, co-founder & CEO, Rario (marketplace for cricket NFTs), “The mention of NFTs in the Budget and taxation associated with this, e.g. 1% TDS is similar to what we see on marketplaces like Amazon. The cricketing world, in particular in India, has already embraced NFTs. Appropriate taxation of NFTs, as announced in the Budget, gives both cricketers and fans comfort that owning an NFT is well within the ambit of the law.”

Some aspects of taxation, however, have led to confusion among players. The industry body is planning to write to the government seeking some clarity on the withholding tax and how it has to be deducted. The industry is hoping that in time, digital assets would be treated on par with other securities like equities and bonds such that they attract long-term and short-term capital gains tax.

But the bug bear is the 1% TDS. BACC says that the opinion they have got does not give it any clarity on where will the tax be deducted. Says Gupta, “As per my understanding, Section 194O says that the 1% TDS has to be deducted by the marketplace, but 194S says the person receiving the consideration has to pay. The consistent response we get is that it is not clear.”

Ashish Singhal, co-chair of BACC and co-founder of CoinSwitch, adds that apart from the percentage of taxation, the decision to tax income from digital assets is good. “It is a very positive development for the industry, as it takes away some of the ambiguity and shows that the government recognises this industry,” he explains.

Check the source here –Source, Financial Express.