India Cryptocurrency Bill: What Investors Need to Know

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With swift penetration and investment of over $6.6 billion in May 2021 in India’s crypto economy, it becomes all the more imperative now to have a well regulated mechanism. In light of this, the Economic Times reports that India’s upcoming cryptocurrency bill broadly aims to define and classify cryptocurrency assets in India. As per the report, currently the government is focussed on the end-use of the assets for regulatory purposes.
In the report submitted by inter-ministerial panel on cryptocurrency, few of the provisions and suggestions laid down in the bill are:

• The primary goal of the bill is to define the cryptocurrency according to the technology used in it.
  
• It is expected to shed light on the tax treatment of these digital assets and will also define how they are classified .
  
• It is proposed that in India, crypto tokens should be recognized as digital assets as opposed to currency.
  
• The policies on exchange ownership parameters, KYC, accounting and reporting standards and so on should be clarified.
  
• The cryptocurrency assets that were defined and classified by the government would only be allowed to trade in India. The crypto coins would then be taxed accordingly.
  
• It has been suggested to apply a similar tax to the Security Transaction Tax (STT) in the coming times. It has also been said that these digital assets could also be entitled to income tax if they are indeed classified as commodities.
  
• The income from the crypto trading could be taxed as business income in the hands of investors at normal rates of income tax.
  

This would be the first time however that cryptocurrency would be defined and segmented on the basis of technology used. However, the working of the regulatory framework of cryptocurrency would become clearer and unambiguous to understand once the bill is approved and enacted. For instance, the manner in which assets will be taxed or regulated, or whether cryptocurrencies will be considered as commodities or currencies are yet not clear.
Some big players in the crypto exchange have voiced optimism and hope for the new bill. ZebPay CEO Avinash Shekhar sounded certain of the benefits of the regulatory framework for investors and entrepreneurs, who he said would be able to confidently participate in this industry.