During the present Winter Session of Parliament, the government made it clear that it has no plans to grow the cryptocurrency business in India.
While the government intends to alter the Income Tax (I-T) Act in Budget 2022-23 to bring cryptocurrency investments and trading under official scrutiny, it remains unclear who would regulate the industry.
“Sections of the Internal Revenue Code could be changed to include the term cryptocurrency.” This would allow the government to keep track of anyone who invest or trade in it. This might be used to track bitcoin investments and earnings, according to a top government official.
There is, however, no consensus on how it should be classed. “How it (cryptocurrency trading and investing) would be taxed is entirely depends on what asset class cryptocurrencies are categorised as,” he argues.
If it is viewed as a financial asset that provides consistent returns over a fixed length of time, it might be controlled by the RBI. If it is determined to be a tradable asset, long-term capital gains tax may apply, with the Securities Exchange Board of India (SEBI) serving as the regulator.
“There’s still some fine-tuning to be done. “How income and investments from it will be taxed will be determined by the definition,” the official said.
During the present Winter Session of Parliament, the government made it clear that it has no plans to grow the cryptocurrency business in India. Pankaj Chaudhary, Minister of State for Finance, stated in Parliament that the government does not collect any data on cryptocurrency because it is uncontrolled in India.
The government has announced that a new cryptocurrency bill, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, will be introduced in the Winter Session. According to the announcement, the bill aims to “prohibit all private transactions.”
However, certain exclusions are allowed in India to promote the underlying technology of cryptocurrency and its applications.”
The bill aims to create a structure that will facilitate the establishment of India’s official digital currency, which will be issued by the Reserve Bank of India (RBI). The Reserve Bank of India is anticipated to start a pilot project for the official digital currency in the near future.
In October 2021, the RBI presented the government with a proposal to alter the Reserve Bank of India Act, 1934. Its goal is to broaden the definition of “banknote” to encompass electronic cash. The Reserve Bank of India is looking into use cases and developing a phased rollout strategy for central bank digital currency (CBDCs).
Prime Minister Narendra Modi presided over a meeting on November 13 to assess the regulatory possibilities for cryptocurrencies. Top officials from the RBI, Finance Ministry, and Home Ministry attended the conference, which concluded that “attempts to mislead the youth through overpromising and non-transparent advertising” had to stop. Unregulated digital currency exchanges should not be permitted to become conduits for terror financing and money laundering, according to the report.
Industry representatives agreed that the digital currency market needed to be regulated during a recent meeting between stakeholders and the Standing Committee on Finance, but they were unable to answer some points presented by legislators.