Taxation is a simple, but important, aspect of the emerging blockchain ecosystem. As cryptocurrencies have become more popular, so have their associated use cases.
For cryptocurrencies like Bitcoin and Ether, taxes are self-assessed by users using these currencies. When it comes to non-fungible tokens (NFTs), however, there are no set guidelines for taxation yet.
With the wide adoption of non-fungible tokens (NFT) in the country, the government is again examining the proposal to tax the blockchain ecosystem, which includes cryptocurrencies and such digital tokens. The use of NFTs has picked up at a large scale with celebrities endorsing them and they have been commercialized, an official said.
Investing in cryptocurrencies & NFT? Soon, you may have to pay 18% GST
The government is working on updating the Income Tax Act to regulate the tax treatment of cryptocurrency transactions. The Finance Minister shared that the current legislation does not provide clear guidance for circumstances where cryptocurrencies are used for investing purposes.
The government also has cited “evolving market practices” as one of the reasons for its proposed update. A new section in the Income Tax Act would provide clarity on how investors should report their holdings. Also, declare their income from cryptocurrency transactions.