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Government says crypto-trading gains and exchange services are taxable

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The government informed Parliament that even though the Income Tax Act, 1961 and the Goods and Services Tax rules do not classify crypto-currencies under their respective regimes, trading gains from crypto investments and services by crypto-exchanges are still taxable. The government's clarification is in response to questions raised by Priyanka Chaturvedi, Member of Parliament from the Shiv Sena on March 23, 2021. Since the gains from crypto-currency investments are similar to returns from investing in stocks, individual investors can be taxed by the Income-Tax authorities, while crypto-exchanges that provide a trading platform can be liable to pay GST. However, the government has no data on crypto-currency earnings of Indian investors, nor any data on the GST collections from crypto-exchanges, Anurag Thakur, the Minister of State for Finance said in the response. Income Tax liability on trading gains Thakur said that the Income Tax Act, 1961 is meant to cover all incomes, from whatever source it is derived from. Therefore, any trading gains can be taxed by the government. "Irrespective of the nature of business, 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 whatever source derived, the legality of income thus being of no consequence. The gains arising from the transfer of crypto currencies/assets is liable to tax under a head of income, depending upto the nature of holding of the same. No data is maintained on cryptocurrency earnings of…

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