Budget 2022: Ayes and nays in taxation of digital assets - Business Guardian
Connect with us

Policy&Politics

Budget 2022: Ayes and nays in taxation of digital assets

Published

on

Non fungible tokens (NFTs) gained tremendous popularity in India in last 4 or 5 years. Eminent personalities, movie stars and pop artists all over the world showed interest and promoted their own NFTs and NFT marketplaces. . Over the centuries, the currency has undergone several metamorphosis in different ages, starting with stone, to cowri, to metal, to paper to paperless and cashless (net banking) transactions. In the digital age, the cryptocurrency or virtual currency (VC) is the new Avatar of the currency. There was fear that the cryptocurrency will be banned in India and the crypto enthusiasts were living under great fear. While the proposal in Finance Bill 2022 has dispelled this fear of impending ban of cryptocurrency, it has also cleared the decks for the introduction of a centralized digital currency by the RBI.

The cryptocurrency was hitherto seen as ‘a bubble, a ponji scheme and an environmental disaster’. It was further argued that it is susceptible to hacking, as it is in digital media and because of its anonymity, it will also be outside the ambit of the anti-money laundering and anti-terrorism laws. Although cryptocurrency promotes technological innovation and has the potential to improve the efficiency and inclusiveness of the financial system and the economy in the long run, the then Finance Minister Mr Arun Jaitley in his budget speech in 2018 said that the Government did not consider cryptocurrencies as legal tender or coin, but the Government would explore the use of blockchain technology proactively for ushering in digital economy.

The RBI issued Circular in 2018 that the entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. The Central Board of Direct Taxes also had recommended to the Department of Economic Affairs in 2018 for its ban. The government was apprehensive of its likely misuse in the hands of miscreants for the purpose of illegal activities and as a knee jerk reaction, the Government introduced ‘The Crypto-token Regulation Bill, 2018’ contained a proposal (i) to prohibit persons dealing with activities related to crypto tokens from falsely posing these products as not being securities or investment schemes or offering investment schemes due to gaps in the existing regulatory framework and (ii) to regulate Virtual Currency exchanges and brokers where sale and purchase may be permitted. But within a year, there was a volte-face and the government introduced a bill “Banning of Cryptocurrency and Regulation of Official Digital Currency Act, 2019” with a proposal to ban the mining, generation, holding, selling, dealing in, issuing, transferring, disposing of or using cryptocurrency in the territory of India.

The apex court hearing a writ petition held in the year 2020 that NFT transactions are not illegal, but set aside the circular of RBI. With the Finance Minister in her budget speech, announcing introduction of central bank digital currency by RBI with centralized ledger, it is now clear that the government aims to treat other cryptocurrencies with decentralized ledger as digital assets and at the same time doesn’t want to make it legal tender.

With this hype around NFTs and cryptocurrencies, the Finance Bill 2022 also proposes amendments in Section 2 of the Income Tax Act, 1961 to define ‘virtual digital assets’ to include all NFTs and crypto currencies. A new section 115BBH has been proposed, which requires gain from the sale of virtual digital assets to be taxed at flat rate of 30%, without any allowance of expenses, except the cost of purchase of such asset and without any provision of set off of losses against other income and without any carry forward of losses from such transactions. Thus the taxation of gain from sale of virtual digital asset has been treated differently from the capital gains arising from sale of other capital assets, which provide for lesser rate of taxation of long term capital gains at 20%, with provision for indexation of the cost of asset and allowance of other costs like brokerage etc.

This move gives a clear picture that the Government encourages the centralised digital currency by RBI, since it has removed the ambiguities on legality of cryptocurrency transactions by taxing it. At the same time, it certainly shows intent not to promote other cryptocurrency transactions, by taxing the gain from such transactions at a higher rate.

The move is understandable because although NFTs and crypto currencies use blockchain technology for storage of binary data using cryptography, these virtual assets are decentralized and do not exist in a physical form, thus having no single authority regulating its issuance. The blockchain on which the ownership of these virtual assets gets recorded, is highly secure, which makes it impossible for the Government authorities to track the transactions, identify the investors and regulate the transactions undertaken through such assets. It leaves a large scope for its usage in illegal activities like funding terrorism etc. Though the bill to ban cryptocurrency is still pending, it seems to be a volte face again on the part of the government, by taxing the gains from the crypto currency transactions, which indirectly clears the government intent about its legality.

However, on the other hand the exorbitant rate of tax imposed on digital asset transfer might come as a dampener to the investors dealing in them, especially so, when transfer of digital assets being treated differently to be taxed at a flat rate of 30% without allowance of any expenses etc. Additionally, the Finance Bill provides for 1% tax deduction at source (TDS) to be made, while transferring the digital assets. Going even further, the transfer of digital assets in form of ‘gift’ is also not exempted from taxation.

The proposal demonstrates the Government’s realization of immense potential that the digital asset trading holds for the Indian economy. After the introduction of TDS on crypto currency transactions, such transactions will leave a trail and the fear of anonymity and its usage for terror funding will be over, as this will create instant report to the government, about the transactions by the agencies dealing in transfer of such digital assets.

The Government, through this move has created a sand-box of sorts that shall allow the regulators to observe the system formally and formulate policies in the future that focus on laying equal standards for all capital assets, be it digital or otherwise.

The RBI issued Circular in 2018 that the entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. The Central Board of Direct Taxes also had recommended to the Department of Economic Affairs in 2018 for its ban.

The Daily Guardian is now on Telegram. Click here to join our channel (@thedailyguardian) and stay updated with the latest headlines.

For the latest news Download The Daily Guardian App.

Policy&Politics

Kejriwal unveils ‘Guarantee’ for LS Polls: AAP’s pledge for change

Published

on

On “Kejriwal ki Guarantee”, he said 24X7 power supply, good education and health facilities, and arranging two crore jobs for youths every year are part of it.

Delhi Chief Minister and AAP national convener Arvind Kejriwal declared “Kejriwal ki Guarantee” on Sunday, outlining 10 urgent initiatives to be pursued swiftly, including the liberation of Indian territory from Chinese control, should the INDIA bloc come to power at the Centre. This opposition alliance, comprising parties like AAP, Congress, Trinamool Congress, and Dravida Munnetra Kazhagam, was established to challenge the BJP-led National Democratic Alliance in the Lok Sabha elections.

A day after his release from jail on interim bail, Kejriwal on Saturday said the INDIA bloc will form the next government and his AAP will be part of it. Addressing a press conference on Sunday, the AAP leader said people will have to choose between “Modi ki Guarantee” and “Kejriwal ki guarantee”. The latter is a “brand”, Kejriwal said.

On the announcement of his guarantees, Kejriwal said, “I have not discussed with my INDIA bloc partners about this. I will press upon my INDIA bloc partners to fulfill these guarantees.”

Kejriwal said while the AAP has fulfilled its “guarantees” of free power, good schools, and Mohalla Clinics in Delhi, “(Prime Minister Narendra) Modi has not fulfilled his guarantees”.

On “Kejriwal ki Guarantee”, he said 24X7 power supply, good education and health facilities, and arranging two crore jobs for youths every year are part of it.

“We worked on management to ensure 24×7 power supply in Punjab and Delhi. We can do it in the entire country. The government schools in the country are in a bad shape. We will arrange good quality education across the country. We know how to do it,” he said.

Kejriwal also promised to end the Agniveer scheme and ensure that farmers get MSP for their crops as per the Swaminathan Commission’s report. “Rashtra Sarvopari is our guarantee. China has occupied our land and we will free it from their occupation,” he said. Kejriwal also promised to provide full statehood to Delhi.

Continue Reading

Economy

Macro & financial stability, boost to infra, extended PLI likely key areas in Modi 3.0

Published

on

If one were to go by the Central Government’s poll manifesto which has stayed aligned to the pre-poll interim Budget, a strong adherence to the path of macro and financial stability as priorities, marked by low inflation, strong external balances, high growth, and fiscal prudence, appears to be the likely scenario if it comes back to power. A DBS Group research by Radhika Rao, senior economist, DBS Group Research and Taimur Baig, MD and Chief Economist, DBS Group Research indicates that the government will continue with the infrastructure push, policies to expand the manufacturing sector, and establish the country’s position as a voice of the Global South.

On the first, the focus will be on improving physical and digital infrastructure, marked by new metro networks, new railway tracks, new-age trains, improved connectivity, new bullet trains, roads, and energy infrastructure. Concurrently, besides expanding the 5G network, improving rural broadband connectivity, exploring 6G technology and the digitization of land records, amongst others, were highlighted in the to-do lists, as per Rao and Baig.

Secondly, Make-in-India and PLI schemes are likely to be expanded, with an emphasis on employment creation, simplification of regulatory processes, appropriate infra for manufacturing hubs, and R&D. A mix of traditional and new-age sectors will likely be prioritized, including a globally competitive food-processing industry, and core sectors (steel, cement, metals, engineering etc), besides a push towards indigenous defense manufacturing, pharma, new age & chip manufacturing, auto and electric vehicles, amongst others.

Existing social welfare programs are likely to be enhanced with better outreach, including, a middle-class focus through the provision of high-value jobs, quality healthcare and infra to improve ease of living, amongst others. Also on the radar is affordable housing program expansion with a focus on slum redevelopment, sustainable cities, etc. The PM Garib Kalyan Anna Yojana is to be a priority, which will continue to provide free foodgrain ration to about 800 mn residents. On healthcare, Rao and Baig see continuity to provide quality free health treatment to up to 500,000 poor families under Ayushman Bharat.

The economists are also of the view that the PM Ujjwala Yojana, which has already benefited 100 mn with cooking gas connections, will be expanded. Subsidies for solar panels on roofs of 10 mn households up to 300 units/month under the PM Surya Ghar Muft Bijli Yojana, unorganized workers, farmers and continuation of financial assistance to farmers under PM Kisan, farm self-sufficiency, etc.), start-ups and micro-credit enterprises, will be the other focus areas to boost the economy from a bottom-up approach.

Rao and Baig foresee limited fiscal implications from these announcements as part of these were included in the interim budget and the manifesto did not outline any new big-bang reforms or fresh social welfare spending programs. “We maintain our FY25 fiscal deficit assumption at -5.1% of GDP with the existing borrowing program,” says the economists.

A broad-based push towards more contentious structural reforms (land, labor, farming, etc.) did not receive a mention in the manifesto, which may still be prioritized if the party returns for a third term. In our view, the incoming government is neither limited by nor will be restricted by the poll promises. To that extent, the scope of reforms can be wider than what has been laid out in the respective manifestos.

Continue Reading

Policy&Politics

Govt extends date for submission of R&D proposals

Published

on

The Government has extended the deadline for submission of proposals related to R&D scheme under the National Green Hydrogen Mission. The R&D scheme seeks to make the production, storage, transportation and utilisation of green hydrogen more affordable. It also aims to improve the efficiency, safety and reliability of the relevant processes and technologies involved in the green hydrogen value chain. Subsequent to the issue of the guidelines, the Ministry of New & Renewable Energy issued a call for proposals on 16 March, 2024.

While the Call for Proposals is receiving encouraging response, some stakeholders have requested more time for submission of R&D proposals. In view of such requests and to allow sufficient time to the institutions for submitting good-quality proposals, the Ministry has extended the deadline for submission of proposals to 27th April, 2024.

The scheme also aims to foster partnerships among industry, academia and government in order to establish an innovation ecosystem for green hydrogen technologies. The scheme will also help the scaling up and commercialisation of green hydrogen technologies by providing the necessary policy and regulatory support.

The R&D scheme will be implemented with a total budgetary outlay of Rs 400 crore till the financial year 2025-26. The support under the R&D programme includes all components of the green hydrogen value chain, namely, production, storage, compression, transportation, and utilisation.

The R&D projects supported under the mission will be goal-oriented, time bound, and suitable to be scaled up. In addition to industrial and institutional research, innovative MSMEs and start-ups working on indigenous technology development will also be encouraged under the Scheme.

Continue Reading

Policy&Politics

India, Brazil, South Africa to press for labour & social issues, sustainability

Published

on

The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment.

India, on Thursday, joined the G20’s two-day 2nd Employment Working Group (EWG) meeting under the Brazilian Presidency which is all set to address labour, employment and social issues for strong, sustainable, balanced and job-rich growth for all. India is co-chairing the 2nd EWG meeting, along with Brazil and South Africa, and is represented by Sumita Dawra, Secretary, Labour & Employment.

The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment. India has pointed out that the priority areas of the 2nd EWG at Brasilia align with the priority areas and outcomes of previous G20 presidencies including Indian presidency, and commended the continuity in the multi-year agenda to create lasting positive change in the world of work. This not only sustains but also elevates the work initiated by the EWG during the Indian Presidency.

The focus areas for the 2nd EWG meeting are — creating quality employment and promoting decent labour, addressing a just transition amidst digital and energy transformations, leveraging technologies to enhance the quality of life for al and the emphasis on gender equity and promoting diversity in the world of employment for inclusivity, driving innovation and growth. On the first day of the meeting, deliberations were held on the over-arching theme of promotion of gender equality and promoting diversity in the workplace.

The Indian delegation emphasized the need for creating inclusive environments by ensuring equal representation and empowerment for all, irrespective of race, gender, ethnicity, or socio-economic background. To increase female labour force participation, India has enacted occupational safety health and working conditions code, 2020 which entitles women to be employed in all establishments for all types of work with their consent at night time. This provision has already been implemented in underground mines.

In 2017, the Government amended the Maternity Benefit Act of 1961, which increased the ‘maternity leave with pay protection’ from 12 weeks to 26 weeks for all women working in establishments employing 10 or more workers. This is expected to reduce the motherhood pay gap among the working mothers. To aid migrant workers, India’s innovative policy ‘One Nation, One Ration Card’ allows migrants to access their entitled food grains from anywhere in the Public Distribution System network in the country.

A landmark step in fostering inclusion in the workforce is the e-Shram portal, launched to create a national database of unorganized workers, especially migrant and construction workers. This initiative, providing the e-Shram card, enables access to benefits under various social security schemes.

The portal allows an unorganized worker to register himself or herself on the portal on self-declaration basis, under 400 occupations in 30 broad occupation sectors. More than 290 million unorganized workers have been registered on this portal so far.

Continue Reading

Policy&Politics

India to spend USD 3.7 billion to fence Myanmar border

Published

on

India plans to spend nearly $3.7 billion to fence its 1,610-km (1,000-mile) porous border with Myanmar within about a decade, said a source with direct knowledge of the matter, to prevent smuggling and other illegal activities. New Delhi said earlier this year it would fence the border and end a decades-old visa-free movement policy with coup-hit Myanmar for border citizens for reasons of national security and to maintain the demographic structure of its northeastern region.

A government committee earlier this month approved the cost for the fencing, which needs to be approved by Prime Minister Narendra Modi’s cabinet, said the source who declined to be named as they were not authorised to talk to the media. The prime minister’s office and the ministries of home, finance, foreign affairs and information and broadcasting did not immediately respond to an email seeking comment.

Myanmar has so far not commented on India’s fencing plans. Since a military coup in Myanmar in 2021, thousands of civilians and hundreds of troops have fled from there to Indian states where people on both sides share ethnic and familial ties. This has worried New Delhi because of risk of communal tensions spreading to India. Some members of the Indian government have also blamed the porous border for abetting the tense situation in the restive north-eastern Indian state of Manipur, abutting Myanmar.

For nearly a year, Manipur has been engulfed by a civil war-like situation between two ethnic groups, one of which shares lineage with Myanmar’s Chin tribe. The committee of senior Indian officials also agreed to build parallel roads along the fence and 1,700 km (1,050 miles) of feeder roads connecting military bases to the border, the source said.

The fence and the adjoining road will cost nearly 125 million rupees per km, more than double that of the 55 million per km cost for the border fence with Bangladesh built in 2020, the source said, because of the difficult hilly terrain and the use of technology to prevent intrusion and corrosion.

Continue Reading

Policy&Politics

ONLY 2-3% RECOVERED FROM $2-3 TN ANNUAL ILLEGAL TRADE THROUGH BANKING: INTERPOL

Published

on

However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity.

In a press briefing held on Wednesday, Interpol Secretary General Jurgen Stock unveiled alarming statistics regarding the extent of undetected money laundering and illegal trade transactions plaguing the global banking network. Stock revealed that over 96% of the money transacted through this network remains undetected, with only 2-3% of the estimated USD 2-3 trillion from illegal trade being tracked and returned to victims.

Interpol, working in conjunction with law enforcement agencies and private financial sectors across its 196 member countries, is committed to combating the rising tide of fraud perpetrated by illicit traders. These criminal activities encompass a wide spectrum, including drug trafficking, human trafficking, arms dealing, and the illicit movement of financial assets.

Stock emphasized the urgent need to establish mechanisms for monitoring transactions within the global banking network. Currently, efforts are underway to engage banking associations worldwide in setting up such a framework. However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity. The lack of real-time information sharing poses a significant obstacle to law enforcement agencies in their efforts to combat money laundering and illegal trade.

Stock underscored the role of Artificial Intelligence (AI) in exacerbating this problem, citing its use in voice cloning and other fraudulent activities. Criminal organizations are leveraging AI technologies to expand their operations and evade detection on a global scale. Stock emphasized the importance of enhanced cooperation between law enforcement agencies and private sector banking groups. Realtime information sharing is crucial in the fight against illegal wealth accumulation.

Drawing inspiration from initiatives such as the “Singapore Anti-Scam Centre,” Stock called for the adoption of similar models in other countries to strengthen the collective response to financial crimes. In conclusion, Stock’s revelations underscore the pressing need for concerted action to combat global financial crimes. Enhanced cooperation between public and private sectors, coupled with innovative strategies for monitoring and combating illicit transactions, is essential to safeguarding the integrity of the global financial system.

Continue Reading

Trending