According to a Bloomberg report citing sources, the government will only enact a law on cryptocurrencies after a global consensus has emerged on how to regulate such assets. It said the government is not planning any legislation soon to regulate the cryptocurrency or tighten its provisions.
As of now, the legal position of cryptocurrencies is not clear as there is no law in the country to regulate them. Following the Union budget’s tax proposal on the cryptocurrencies, investors said the provisions effectively legalized crypto trading. However, Finance Minister Nirmala Sitharaman has said that taxing cryptocurrencies does not mean that it has been legalized. The matter is still under consideration.
Sitharaman has also said that the government will make its position known on cryptocurrencies upon completion of the ongoing consultation process. In the past, the Reserve Bank of India has warned people not to invest in cryptocurrencies. Referring to a speculative bubble that gripped the Netherlands in the 17th century, RBI Governor Shanktikanta Das has said these digital assets lack the underlying value of even a tulip.
The Union’s 2022 budget proposed a 30 percent tax on profits made from the sale of all crypto assets, with a one percent tax withheld at source on all such transactions. The new rules will apply from Friday (1 April). Under the new rules, no deductions are allowed, except for acquisition costs, and no transaction loss may set off profits. A new section 115BBH has been inserted into the Income Tax Act, 1961, to tax virtual digital assets. The rules also say that losses from digital assets cannot be carried over to the following year.
The government also clarified last week that losses arising from the transfer of virtual digital assets cannot be set off against another person’s profits. It also said mining costs cannot be treated as acquisition costs.
In February, Sitharaman had said at a press conference that the government and the Reserve Bank of India (RBI) are “on board” regarding the handling of cryptocurrencies and said discussions are underway about the regulatory treatment of such digital virtual assets.
She had said: “We are all discussing ahead of the budget, the discussion continues and we will continue to discuss. All the decisions that have been made about it, it is clear that it is a very serious matter, it is a central bank digital currency of a certain description, so clearly with more focus after having had consultations.”
She recently said that after the talks are over, the government will reflect on it and express its position on it.
In Rajya Sabha, Sitharaman has also said that the government will decide later on whether or not to ban cryptocurrency, taxing transactions does not legitimize it.
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