“The extant statutory provisions on scope of total income for taxation as per section 5 of the Income-tax Act, 1961, envisage that total income shall include all income from any source derived,” Finance Minister Nirmala Sitharaman explained in response to a question by Rajya Sabha MP Sushil Kumar Modi during the winter session of Parliament on November 30.
She added that there is no separate section or provision in the Act which “deals specifically with the rate of tax, applicability and collection of tax on the income earned by crypto exchanges” presently. The response elaborated that the income earned by these exchanges is liable for tax under the head Business or Profession stated in Chapter IV of the Act.
Sitharaman also clarified that there is no ready information on tax collected from investments made in crypto assets during the question hour in Rajya Sabha. The government had earlier revealed that it has no information on Bitcoin transactions in the country.
The response sheds some light on how crypto investors can compute their tax liabilities. It also highlights some of the questions that the government will need to address in the upcoming crypto bill slated to be introduced in the winter session.
Is the government exploring blockchain technology?
The finance ministry informed the upper house that two public banks— State Bank of India and Canara Bank— are part of a company called Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC). They are exploring how blockchain technology can be used to provide various financial services. Blockchain is the underlying technology behind all cryptocurrencies; it is a distributed database that is shared among the nodes of a computer network.
The ministry added that the Reserve Bank of India (RBI) is offering guidance for the development of blockchain-based applications through its new regulatory sandbox environment.
“…it (SBI) has initiated steps to incorporate Blockchain technology in trade related transactions. Further, SBI has been onboarded on a blockchain enabled platform, for exchanging payment related compliance queries,” MoS Finance wrote in his reply to a question asked by Rajya Sabha MP Dr. K. Keshava Rao.
He also informed that Canara Bank has formed a small technology innovation team that is tasked with identifying potential use cases best suited to banking operations.
The reply suggests that the government is not shutting itself off from exploring the potential of blockchain that is powering several technical advancements. It might be a sign indicating that the upcoming crypto bill may promote innovation with regard to blockchain.
A new bill is in the works
The finance minister, during the question hour, disclosed that the government had intended to introduce the crypto bill in February but it was forced to consider “other dimensions”, which is why they are now working on a new bill and it will not be “same”.
She said that the new cryptocurrency bill will be presented before the Cabinet soon. The bill will be introduced in Parliament after the Cabinet approves it.
Moreover, the government also hinted that it is pressing full steam ahead with central-bank digital currencies (CBDCs) when it revealed that it has received a proposal from the Reserve Bank of India (RBI) in October 2021, to amend the Reserve Bank of India Act, 1934, to include CBDCs in the definition of ‘bank note’.
Also read:
- Government says crypto-trading gains and exchange services are taxable
- How cryptocurrencies get their value, are we in a bubble, and can crypto be regulated? Raghuram Rajan answers
- Crypto without oversight is a threat to sovereignty: Maharashtra IGP Brijesh Singh
- All the signs that suggest India’s crypto bill won’t ban cryptocurrencies outright
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