Tag: taxation

Investors rush to seek tax advice on cryptocurrency investments, BFSI News, ET BFSI

Personal Finance

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Many investors who invest or trade frequently in cryptocurrencies are rushing to their advisors to figure out the tax implications of their investments, even as the government looks to introduce a legal framework around cryptocurrencies. Investors want to know the income tax implications on their returns, which can range anywhere up to 30%, say tax experts, given the regulatory vacuum around cryptocurrencies.

Tax experts are divided as to whether the returns from crypto assets must be categorised as capital gains-what is applicable on assets such as equities or real estate – or business income.

“As regards tax treatment of sale of cryptocurrency held by individual investors, the principles governing taxation of securities as capital gains versus business income would equally apply in respect of cryptocurrency assets,” said Sudhir Kapadia, national leader-tax at EY India.

“In other words, if the frequency and number of purchase and sale transactions is very high, the tax authorities may be inclined to assert business income characteristics for these transactions.”

Many investors have made substantial returns from cryptocurrencies and have even squared off some of their positions, say tax experts.

In most cases, the money has come back to their bank accounts directly from crypto wallets or through some other channels and this is set to attract taxman’s attention.

This comes at a time when the government is looking to come up with a cryptocurrency law.

The government is planning to define cryptocurrencies in the new draft bill and will treat them as an asset/commodity for all purposes, including taxation, ET first reported on September 3.

The draft bill also moots proposals to compartmentalise virtual currencies based on their use cases into payments, investment/security, and utility (source of income), people close to the development told ET.

Tax experts say that tax on cryptocurrencies will also depend on how the government defines the asset.

Many investors have started enquiring on how to tax their returns from crypto assets, say tax experts. “The enquires relate around aspects such as whether cryptos are to be treated as assets or goods, exchange of one type of crypto currency for another crypto currency, valuation of cryptos, conversion of cryptos into fiat, taxability of consideration received in cryptos by non-crypto businesses, gifts of cryptos (i.e. transfer of cryptos from one soft wallet to another without consideration), computation of income on cryptos and the tax rates, indexation, deductions allowable on such income,” said Paras Savla, partner at KPB & Associates, a tax advisory firm.



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Retail depositors earning negative returns; relook taxation on interest: SBI economists

Banking & Finance

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In a note, which pegged the overall retail deposits in the system at Rs 102 lakh crore, the economists led by Soumya Kanti Ghosh said: "If not for all the depositors, the taxation review should be carried out for at least the deposits made by senior citizens who depend on the interest for their daily needs."

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Fintechs are paving path for greater financial inclusion in India

Banking & Finance

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Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%.

By Kapil Rana

Fintech organizations have a wide scope of business in India, particularly around payment lending, personal finance management, and regulation technologies. Needless to say, that nations’ immense population, expanding the number of web users, and the government’s endeavours to make the nation digital are bringing numerous new opportunities for Fintech and new companies. Financial organizations, new businesses, investors, and controllers are accepting Fintech and utilizing those opportunities to stand in the competition and grow fast. In recent years, India has seen the development of various new start-ups, regulators, the public and private financial institutions that have made the Indian Fintech market the fastest developing business sector in the world. 

Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%. India has witnessed 2.7 billion dollars of Fintech investment last year. This was the second largest investment close to 3.5 billion dollars in 2019 as confirmed by Professional Service Firm KPMG. Likewise, the report of Florida-headquartered ACI worldwide uncovered that 25.5 Billion constant exchanges were made in India in 2020 that is the highest in the world. 

It goes without saying that the increased adoption of Fintech technologies powered by artificial intelligence (AI), machine learning (ML), data analytics, process automation, and Blockchain has transformed the financial world. These advancements empower Fintech to run colossal measures of information through calculations designed to distinguish patterns and risk, fake practices, spam information, and make or suggest the right moves. 

FinTech organizations utilizing these innovations to assist organizations to manage and control activities like managing and controlling their finance, fulfilling tax compliance, paying and accepting bills, and utilizing other financial administrations according to the requirements. They additionally empower customers, organizations, and entrepreneurs to have a superior comprehension of investment and purchasing risk. Till today, countless new businesses and financial institutions are accepting Fintech to control and manage their financial operation and decrease their functional expense. However, still there are many difficulties and bottlenecks in the adoption of financial technologies, which are making it hard for organizations to use its benefits entirely. 

Key Challenges for Fintech Start-ups Companies

Cyber security is the biggest challenge for Fintech businesses. The risk of information leakage, malware, security break, cloud-based security risk, phishing, and identity threat is making the Fintech businesses helpless at some point or others. Such dangers are unwarranted by clients, therefore, Fintech associations need to advance their technologies, teach customers, and make powerful policies to eliminate such dangers. 

Fintech organizations work in a joint effort with traditional financial institutions in different manners like association, incubation, and acquisition, and so on. This joint effort poses many obstacles like the two players have their own arrangement of rules relating to size, productivity, and acknowledgments. Likewise, Fintech organizations are essentially intended to work with a modern working model. So, it is a bit hard for them to keep a smooth relationship with traditional banks and other financial institutions. Also, Banks fear working with Fintech as they risk losing their reliability. 

Further, banking and other monetary foundations are strictly regulated. Similarly, Fintech organizations in India should be intensely managed with policies that will assist them with moderating the possible dangers of network safety. However, many existing monetary laws and government strategies are not completely favorable for Fintech start-ups in the Indian financial sectors. 

Most of the Indian clients are still utilizing cash rather than tech-driven options like UPI transactions. Fintech is attempting to assemble a credit-only economy and this will be a significant snag for them to handle, particularly to push conventional Indian buyers to embrace digital payments. Dependency on cash, cybercrime, and poor internet services are a couple of obstacles among others that are making it hard for Fintech organizations to do business in India. 

Summarizing 

Post demonetization, the number of Fintech businesses in India has been substantially increased. These businesses are vivaciously working on different sub-areas like mobile POS (point of sale), internet banking solutions through neo banking, managing compliance-related issues on a solitary platform, credit management, and so on. Thanks to the innovative Fintech plan of action that is bringing great advancements in the fields of finance and technology to help organizations and small businesses in their processes. 

The fintech business model is working with a remarkable and consistent framework that permits entrepreneurs, business owners, and proprietors to go through huge information and make better choices in their businesses. There is no denying that Fintech is forming the future of next-generation financial solutions, and despite the way that there are a few obstacles that Fintech companies are coming across in the current business landscape, they have certainly a thriving future in India.

(The author is founder and chairman Hostbooks. Views are personal and not necessarily that of Financial Express Online.)

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Here’s a ready reckoner on changes in new ITR forms

Personal Finance

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Last week, the CBDT notified the new ITR forms for assessment year 2021-22. Tax payers can breathe easy this year, given the limited changes in the tax forms. The changes this year are only with respect to certain amendments in the tax law, proposed in the Budget of 2020.

Besides, certain schedules introduced last year to accommodate the relief given to taxpayers during the pandemic have now been removed. For instance, Schedule DI (Detail of Investments/deposit/payment for the purpose of claiming deduction) finds no place in the new ITRs.

Here is a low-down on a few important changes in the new ITR forms, that can come in handy while filing your returns for assessment year 2021-22.

Eligibility tweaks

The exclusion list of ITR-1, that is, persons who cannot file their returns using ITR-1 has got some new frills this year. Now, taxpayers for whom TDS has been deducted under section 194N can no longer file their returns in ITR-1. Per the section, banks (including co-operative societies and post office) are required to deduct TDS at the rate of 2 per cent on cash withdrawals exceeding Rs 1 crore (in aggregate) in the previous year. For non-filers of income tax returns (i.e. those who did not file returns in all of the last three assessment years), the deduction shall be 2 per cent for amounts exceeding ₹20 lakh or at the rate of 5 per cent if withdrawals exceed Rs 1 crore.

In addition, following the recent amendments to tax law, employees who can defer their tax liability on ESOPs cannot file returns in ITR 1 or 4. They have to file returns in forms 2 and 3 only.

ESOP taxation

The Budget of 2020 proposed deferring the tax on ESOPs allotted for employees of a narrow stream of eligible start-ups. ESOPs are taxed twice, in the hands of the recipient employees – once at the time of receipt as a perquisite and next upon subsequent sale of the shares (Capital gains).

Employees of eligible start-ups can now defer the tax on perquisite by 48 months from the end of the relevant assessment year in which the shares are allotted. The Schedule TTI (Computation of tax liability on total income) now requires clear bifurcation of such current and deferred tax amount on ESOPs.

Dividend income

Another Budget amendment was the abolition of DDT and the consequential taxation of the same in the hands of the shareholders. In the ITR forms, apart from withdrawing the redundant mentions of the DDT sections, the Schedule OS (Income from Other Sources) has also been accordingly tweaked to accommodate these amendments. For example, a new row has been inserted to provide deduction for interest expenditure which can be claimed as a deduction under section 57(1) if incurred in relation to dividend income. Further new rows have been added to incorporate dividends earned by non-resident taxpayers, that are chargeable at special rates, under section 115A.

ITR Forms 2, 3 and 4 required taxpayers to provide quarterly break up of dividend income, which helps in computing the interest liability according to advance tax provisions. This break up is now also required to be furnished by taxpayers filing returns using ITR-1.

Concessional tax rates

Starting AY 2021-22, taxpayers can opt for lower tax regime under section 115BAC, by foregoing certain exemptions and deductions. In Part A of all the ITR Forms, taxpayers are required to specify if they are opting for new tax regime under section 115BAC. Assessees with income from business or profession were required to exercise such option on or before the due date for furnishing the returns by filing Form 10-IE. ITR Form-3 hence requires such taxpayers, to furnish the date of filing form 10-IE and its acknowledgement number.

Besides, consequential amendments, with respect to exemptions and deductions foregone have also been made. For instance, in ITR 3, amendments have been made in Schedule DPM (Depreciation on Plant and Machinery) and Schedule UD (Unabsorbed Depreciation), to make one -time adjustment in the written down value of the plant and machinery, for the exemptions now foregone.

New utility

In a bid to ease the burden of taxpayers when filing the returns, the CBDT has launched a new offline utility called JASON for the assessment year 2021-22. The existing excel and java utility have been discontinued. The new JSON utility has currently been enabled for ITR 1and 4 only.

The utility will import and pre-fill the data from e-filing portal to the extent possible. It is enough if taxpayers fill the balance data. However, facility to upload ITR at the e-filing portal using the utility is not yet enabled. It is expected to be available sooner than later.

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