Ahead of its long-anticipated bill that would ban cryptocurrencies. India is planning to impose a personal income tax and a goods and services tax on gains from trading cryptocurrency assets.
“Bitcoin will be categorized as financial services attracting 18% GST on fee commission collected [by exchanges] under this segment. Plus, [income tax] to be paid on the earnings from this,” an anonymous senior finance ministry official said.
Indian authorities are aiming to collect both taxes for the fiscal year April 2020 to March 2021. This bit of news is the first clarification on how the cryptocurrency industry and its users will be taxed.
Of course, the taxes figure to be brief as India is planning to introduce a cryptocurrency bill in the ongoing session of Parliament. That will seek a ban on “private cryptocurrencies”. As well as the formal start of development of a digital rupee to be issued by the central bank.
India’s Minister of State for Finance Anurag Thakur previously revealed the impending bill will fill policy gaps. However, the bill’s contents are still unknown and the government has yet to define the term “private cryptocurrencies.”
“Every income is taxable whether it is coming from permissible or impermissible activity,” another anonymous senior finance ministry official said.
“If you are providing any transaction which attracts GST, then the tax has to be paid. When both giver and taker admit that a certain service has been provided and for that some amount has been paid on the basis of a receipt, then the tax has to be levied.”
Crypto Gains Should Be Taxed in India
It is up for debate how crypto gains should be taxed. CEO of Binance-owned WazirX Nischal Shetty said such earnings are taxable like any other income and should be declared in the income tax returns.
Shetty said that his exchange has been voluntarily paying GST on trading fees collected from customers. On the other hand, taxation does not necessarily imply legality.
“Let it be clear that just because income tax or GST has been charged on the transaction, it does not by itself make the transaction legitimate. Taxability and legality of transactions are independent of each other,” a senior official at the Finance Ministry added.