Clarity on tax for new age investments needed


Recently the government has passed many laws relating to many assets of their nature. But their taxation part is not clear.

The taxpayers are seeking tax relief in this time of pandemic to endure the crisis and to increase their disposable income. But when it comes to new-age investment there is no clear taxation policy.

The new-age investment options, such as cryptocurrencies, or derivatives such as Futures & Options or Sovereign Gold Bonds, are favoured by the millennials.

They look forward to investing in it because they believe it is a better investment choice.

But tax-related clarity is required for these instruments. As a result, the investor can have better information on tax implications, so that they don’t have to face litigation later on.

One of the most important and debated new investment instruments is cryptocurrency. The Indian government has not yet disclosed their policy about cryptocurrency. There are rumours of a new bill related to cryptocurrency.

The investors anticipated the bill to contain changes regarding income tax provisions. It was expected that the cryptocurrencies would be categorized, as a capital asset or business asset or even as an investment currency.

If they are releasing a bill related to cryptos, then they should decide if the income from cryptos should be considered as business income, a speculative or a non-speculative transaction.

It is not even clear on how to interpret income or loss from cryptocurrency transactions.

This consideration is necessary since it will directly impact crypto losses, which may be set off against other business income.

Through CBDT vide Finance Act, 2013, an amendment was brought in, where the trading in derivatives will not be considered as a speculative transaction.

The losses from trading derivatives could be carried forward for eight years, which in speculative business is four years.

The law is clear about the head of income for taxing the income from such derivatives. But ambiguity exists amongst taxpayers regarding the maintenance of books in such cases.

Lots of taxpayers invest in futures, options and derivatives. They need clarity on requirements to maintain books of accounts and their audit. This is needed especially in the case of small traders, who have incurred losses in derivatives.

They want to claim the losses from such transactions but do not want to undergo the burden of maintaining books or auditing them.

As the number of investors is growing in this sector, the government may come up with some specific guidelines for this.

The government recently rolled out Sovereign Gold Bond, as an alternative for physical gold, by the Sovereign Gold Bond Scheme, 2015.

This law was intended to exempt capital gains arising on redemption of such Sovereign Gold Bond schemes. But to avoid any confusion related to it, appropriate amendments should be made.

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