India is considering a new bill to segment cryptoassets based on use cases and technologies applied.
The Indian authorities have revised their position on cryptoassets, abandoning a complete ban and proceeding with a phased development of a regulatory framework to regulate them. The Reserve Bank of India and government commissions were involved in legislative work. The joint work resulted in a bill defining the legal status of cryptocurrencies in India, their classification and taxation procedure.
Tax regime for cryptoassets
The new bill defines a tax regime for cryptoassets and a legally approved classification of cryptocurrencies. It remains unclear if cryptocurrencies will count as stocks, commodities, or currencies. One of the draft laws proposed for approval by the Parliament proposes to classify cryptocurrencies as digital assets, and not as a currency.
The proposed bill for approval specifies that the taxation of cryptoassets will be similar to the tax on securities transactions. Accordingly, only categorized, defined and regulated cryptocurrency assets, admitted by the regulator to trade and investment in India, will be subject to taxation.
If a decision is made to classify cryptocurrencies as commodities, they may also be subject to income or income taxes. Investors may have to tax them as business income at the appropriate progressive corporate income tax rate applicable in the country.
The implications of the new law on the legal status of cryptocurrencies in India and its impact on the development of the Indian crypto industry remain to be seen. This move by the government can both raise the “morale” of investors and their confidence in the future of cryptoassets, and lead to the opposite effect. Optimists believe that clear rules and government regulation will lead to better investment opportunities both in India and in the geographic region as a whole.
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