Under mounting pressure to make decisions and take steps to clarify cryptocurrency matters, the Indian government may soon shed some light on one of many unclear aspects – taxation. Local media have turned the spotlight on Budget 2018, but lots of titles end with question marks. The new financial frame is to be presented next week by the Finance Minister. Recent developments suggest that the status of bitcoin in India is likely to be determined, at least in terms of how much cream the government is willing to scoop out.
Finance Minister to Answer Many Questions
All eyes are on minister Arun Jaitley, the Financial Express wrote, asking: “Are Bitcoins Taxable in India?”. “Can the Budget Dodge Bitcoin?”, the Economic Times is wondering, referring to his budget expected on February 1. Anxiety about the true intentions Delhi hides behind mandatory warnings has been building up in Indian society. In short, “Cryptocurrency Enthusiasts Wait for Clarity”, as Zeebusiness put it on its webpage.
Members of the Indian crypto community have been calling for clear government policies towards cryptocurrency trading and taxation. Companies planning to set up new mining facilities and POS terminal networks in the country have also asked for clear guidelines to steer their businesses.
Clarity, in regards to taxation, is likely to be offered with the new budget. There are strong indications of the government’s eagerness to tap into crypto income, despite its consistent hostility towards bitcoin. Back in December, the Income Tax Department carried out searches at major exchanges. More recently, Indian crypto traders received notices from the tax authorities concerning crypto investments not reflected on their tax returns, as news.Bitcoin.com reported.
Last week local media revealed that India’s top banks had suspended some accounts of major crypto exchanges, suspecting “dubious transactions”. According to sources quoted by ET, at least eight accounts in various banks, including the State Bank of India, Axis Bank, HDFC Bank, ICICI Bank and Yes Bank, have been suspended. Cash withdrawals from other accounts were limited. Zebpay, Unocoin, Coinsecure and Btcx India have been mentioned as targeted exchanges. The banks were asked to file reports of suspicious transactions with the Financial Intelligence Unit.
Taxation without Representation (What Are the Options)
According to a tax authority official, quoted by ET, a special team has been investigating the applicability of sales tax on bitcoin exchanges for the previous financial year. It has been estimated that some of them operate at margins reaching 20% due in large to the gap between buying and selling rates, reaching 25% in some cases. The total revenue figure for the top 10 exchanges is about 400 billion rupee (more than $6 billion USD), Indian media reports.
Taxing bitcoin income is another subject that needs clarification. As both the Reserve Bank of India and the Finance Ministry do not recognize cryptos as currencies and legal tender, two options remain on the table. Goods and Services Tax can be levied at bitcoin and altcoins – 12%, if they are considered goods, or 18% if they are deemed as services. Currently, Indians are not paying GST on their bitcoins, but the government is working on it, Karan Batra, CEO of Charteredclub, told FT. He also shared his hopes for clarity in the new financial year.
In December the Finance Ministry set up a special panel to follow developments, including the volume of bitcoin related trade, and help speed up the process of adopting regulation. Representatives of the Department of Economic Affairs, the Reserve Bank of India and the Income Tax Department have been invited to join the committee. Again, no members of the crypto community have been asked to participate or share opinion.