Crypto Tax: NFTs Should Not Be Associated With Cryptocurrencies For Taxation, Exchanges Say

Mumbai: The non-fungible token (NFT) community has said that the government is being unfair to the new digital asset class by bundling it with cryptocurrencies in the recently announced digital asset tax regime.

Industry participants said that NFTs are digital assets and not currencies like crypto, so they should be treated separately for tax purposes.

“NFTs are digital ‘goods’ and existing regulations on physical goods are working well with some tweaks to account for the digital nature of these assets,” said Ankit Wadhwa, Managing Director of Rario, an object platform. digital collection for cricket. “Fundamentally, considering NFTs as only commercial goods is not correct. NFTs are collectibles, have utility value, and are also assets.”

NFT companies believe that a 30% tax is too high for a market that is still in its infancy, as the majority of Indian NFT buyers only invest between Rs 10,000 and Rs 40,000.

And now the high tax rate has become an additional issue with the inherent volatility of the asset class.

The consideration of 1% TDS on sale will also increase the cost for NFT buyers.

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Exchanges make money in two ways: by selling new collections or by making commissions on secondary sales where the margins are lower.

“On the sale of new collections, we will pay more than 30% surcharge and duty-free. On secondary sales, we will have to pay 1% TDS. Exchanges will just pass the cost on to buyers,” said a business owner. exchange.

NFT companies believe that the asset class needs a nuanced tax structure because they are “unique” – each NFT token is unique and cannot be duplicated – and are valued on the scarcity of artistic or digital assets.

“NFTs have notional value and are collectibles. People buy collectibles from pawnshops around the world, and they are not taxed at 30%. The government has consolidated all digital assets into one single category,” said Bibin Babu, co-founder of NFT marketplace Colexion. “People offer paintings and there is no tax on it, but if someone offers an NFT, the person who receives it will have to pay a 30% tax, plus a surcharge and a tax, on their realized value.”

Art creators receive a royalty on sales and they will also be charged 30% on income, and when the art is resold they will be taxed again on the royalty received on the new sale, industry insiders have said. ‘industry.

An additional issue for the industry is that a bunch of pure Indian NFT exchanges are not KYC compliant, but with new regulations they will have to adhere to KYC and anti-money laundering rules.

“The good thing is that people are no longer worried about the legality of NFTs. We have seen volumes increase by 10-15% since the budget announcement. Exchanges will now have to adapt to the new tax regime and get into compliance quickly,” said Ramkumar Subramaniam, co-founder and CEO of GuardianLink.io.

In the United States, the IRS classifies cryptocurrency as property rather than currency and calculates taxes over the period of holding the asset.

If a purchaser’s taxable income is less than $80,000, the taxpayer pays no capital gain tax. The long-term capital gain rate is 0%, 15% or 20%.

In the UK, Her Majesty’s Revenue and Customs do not have clear rules. NFTs are taxed under the capital gains tax regime, but trading falls under business income.

Market tracker DappRadar had estimated NFT sales to reach $25 billion in 2021.

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