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As the government of India creates plans to “define” cryptocurrencies, the asset class is potentially looking at a changed status in the country, the Economic Times reported. Indications were that the government would propose a new bill to segment them based on use cases, which would be a first, as these digital assets have never been classified based on the technology used. For now, however, the government will focus on the end use of the assets for regulatory purposes.
New tax treatment?
The new proposal will include an outline of these assets’ tax treatment apart from defining how they are categorized within the statutory framework. It remains unclear as to whether cryptocurrencies will be considered equity, commodities, or currencies. The report suggested that the government classify crypto as digital assets as opposed to currency while clarifying the policies on reporting requirements, accounting, KYC, and exchange ownership aspects at the same time.
Only regulated cryptos can be traded
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The report also informed that only categorized, defined, and regulated cryptocurrency assets would be subject to trade and investment in India – and taxed accordingly. By all accounts, it appears a tax not unlike that on security transactions will apply moving forward. On a related note, if cryptocurrencies ultimately are classified as commodities, they could also be subject to income tax. Investors might have to pay tax on them as business income at the respective progressive income tax rate that applies in the country.
A previously ignored asset class
In the past, the Reserve Bank of India did not deal with cryptocurrency at all. The digital asset class was neither regulated nor did there exist any framework for it. That said, these recent developments aren’t necessarily negative. The government’s move could boost morale for cryptocurrency investors in the country and the geographical region in general. Regulation might result in improved investment opportunities as knowledge of and about the previously unfamiliar assets spreads.
The consequences the new bill will have on the market remain to be seen as it grabs the attention of exchanges, traders, industry experts, and investors.