The government could, in
the upcoming Union Budget 2022, consider imposing TDS/TCS on buying and selling
of cryptocurrencies above a certain limit. These transactions could be brought
within the scope of specified transactions to report to income tax authorities.

Nangia Anderson LLP Tax Leader Aravind Srivatsan told PTI that a
higher tax rate of 30% should be imposed on earnings from the sale of
cryptocurrency similar to the winnings from lotteries, game shows, puzzles, etc.

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Elaborating on what the Budget could have in store for the crypto
market, Srivatsan said India has the highest number of crypto owners globally
at 10.07 crore. He added that a bill to regulate cryptocurrencies was expected
to be introduced during the Winter Session of Parliament. However, it was not
introduced, and it is now expected that government may present the bill during
the Budget Session. The government may not ban cryptocurrencies but it can
subject them to a regressive tax regime.

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Noting the size of the market and the risk involved with
cryptocurrencies, the government may bring them under the provisions of tax
deducted at source (TDS) and tax collected at source (TCS) above a threshold to
capture footprints of  investors, added Srivatsan.

Both sale and purchase of cryptocurrencies could be brought under
the scope of reporting in the Statements of Financial Transactions, just as
trading companies report the sale and purchase of shares and units of mutual

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The income tax law has a concept of reportable account to keep an
eye on high-value transactions made by taxpayers. Companies, financial
institutions and stock market brokers fall under the ambit of such reporting.

Currently, there is no regulation on the trading of
cryptocurrencies in the country.

Also Read | Budget 2022: Government to define tax on crypto in upcoming budget

Budget session in the
Parliament will begin on January 31 and Finance Minister Nirmala Sitharaman
will present the Budget on February 1 at 11 am.