The government plans to define cryptocurrencies in a new bill that proposes and finances investment case payments and utilities.
Cryptocurrencies will be treated as an asset for all purposes, including taxes and as per user charges - payments, investments or transactions.
This will be the first time that cryptocurrencies have been categorized according to the technology they use, but government focus will depend on the use of end-of-life assets for regulatory purposes, sources said.
The bill is also expected to explain the tax treatment of these assets, so that they are clearly disclosed in the books of account.
"The government in its draft version works to define cryptocurrency and its treatment in a variety of applications, so that it can be properly treated in the accounts and must be taxed properly," said a source. "It is not intended to allow payments and accommodation in real terms."
Whether for tax purposes or for other purposes, there is no indication that crypto assets are monetary, asset, service or close to fair value.
This is the official lacuna, unless the property is defined, the ambiguity of how it should be paid or how it should be managed becomes a question.
According to people close to the development, the government is looking to first define cryptocurrency.
“Crypto assets can be categorized on the basis of the technology they use or can be defined in their final use. Therefore, before talking about how regulations should work, the government should explain what cryptocurrencies mean, ”said a development expert.
Recently reported that crypto exchanges have made policy recommendations for regulating cryptocurrensets, including defining cryptocurrencies as digital assets and introducing a system for registering home exchange transactions.
They suggested that India needs to accept crypto tokens as digital assets, not financial ones, and specify policies regarding the exchange of patents, KYC, accounting and reporting standards, among others.
“There are more than 5,000 different cryptocurrencies, each with its own unique legal features. Therefore, rather than just cryptocurrency technology, regulation should be done through the use of end-user or token function, ”said Jaideep Reddy, technology leader at law firm Nishith Desai Associates.
People familiar with it have said that only cryptocurrencies included under government definition will be allowed to be sold in India.
These crypto assets will be taxed accordingly, say people who know about the development.
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