Even though the blockchain and crypto industry has made great strides in redefining innovation, society, and economic growth in countries like the US and China, India is yet to unlock the full potential of this technology. According to reports from 2021, India is considered one of the leaders in adopting cryptocurrencies. For years, since its inception, Indian investors have exponentially invested in digital currencies. So much so, that they consider them as digital gold. The Indian government attempted to regulate the crypto market back in 2021, in the Winter Session of the Parliament, but the session ended without any definite decision on the crypto bill. The Indian crypto fraternity now expects to find some clarity in the Union Budget session in 2022.
The crypto community is hanging by a cliffhanger, waiting for the government to give clarity, whether or not the Parliament's decision will be in favour of the industry. In this era of digitisation, experts and market leaders anticipate the declaration of some clear regulations.
"The Indian crypto market is booming and has witnessed significant growth over the past couple of years and hence the long-pending industry status is the need of the hour. While we are waiting for the official announcement of the crypto bill, we are hopeful that the government will support in implementing the same," said Abhinav Soomaney, a leading Forensic and Crypto Expert.
He further recommended that taxing cryptocurrency investments as an asset class will be the most viable option for the Indian government as per which if tokens are sold within 3 years of the holding period, it will be taxed as STCG if not then LTCG. Also, NFT transactions should be treated as an asset class too, this will give more clarity to investors. And for NFT creators, it can be treated as a regular business that maintains a timely P&L to record and expense COGS or any other business-related expenses involved with creating and posting the NFT for sale.
According to him, Defi loans, swaps, and staking rewards should be considered as the bank's FD and not trades. Investors shall pay taxes only on the interest amount received in return for blocking their funds with such third-party software. Coin-to-coin exchanges like selling BTC to buy ETH should be treated as a taxable transaction because technically the investor is selling a pre-owned asset to buy another asset.
He further suggested that the transfer of coins from one wallet to another must be tracked by the government to avoid tax evasions. This can be done by implying certain guidelines for on-chain exchanges like WazirX to report transfers over INR 5 lakhs, per investor, in a tax year.
Abhinav ended his discussion by insinuating, "We are bullish that the government will help set standard guidelines for India-based crypto investors and support the future of blockchain development."
The blockchain and crypto revolution has transformed the global financial and economic scenario to a great extent. Countries like El Salvador have already set high standards by adopting volatile cryptocurrencies like Bitcoin as the legal tender. The Indian Government might also come up with favourable regulations in its next Union Budget that will clarify the emerging state of cryptocurrencies in the country.
