At the end of March, the Indian Government introduced new cryptocurrency rules for companies in the country. It mandated that, starting from April 1st, all Indian firms that deal with crypto must report all their cryptocurrency transactions and holdings
when they submit financial information for taxation.
As the Minister of State for Finance and Corporate Affairs Anurag Singh Thakur stated, since income from whatever source derived is included in the Income Tax Act, the gains from cryptocurrency-related services are liable to be included in these rules.
This really does not come as a surprise. Cryptocurrency is following the same formula as any other new innovative financial service and will likely go through the same development lifecycle.
Governments globally after considering regulation and thereby bringing an instrument into the fold will always then consider whether and how it could be taxed. This is already the case in other countries, such as the United States. Once India has ironed
out its crypto regulatory regime we will likely see inclusion into tax laws. And crypto, just like any other new financial instrument, will not escape this process. Ultimately, it has the potential to be a positive thing.
The possibility of tax income also helps the regulator self-regulate to some degree. Controlling the industry so tightly that crypto operations are not financially viable in India would ultimately make the regulator lose out on tax income. Taxation is always
a sensitive subject, but the pattern is known and there is no surprise in crypto eventually falling under taxation regimes like many other financial instruments before it.