Govt looking to paint NFT picture in crypto bill

To begin with, the government may provide a broad outline on NFTs from a regulatory point of view and throw some light on how they should be taxed, said one of the persons.

Many Indians,
including celebrities, have clambered aboard the NFT bandwagon lately.

“The government could first define cryptocurrencies and then also define NFTs. For all practical purposes NFTs could be treated in a similar way as cryptocurrencies,” the person said.

NFTs are
essentially a unique code or blockchain-based digital file. Underlying the NFT can be an original art work, tweet, video or even a poem recited by Amitabh Bachchan.

“The government would define the type of crypto assets, and NFT would be specifically mentioned there. This is done to address some of the issues that could arise in future around regulatory issues,” said one of the persons.

The government is working toward defining and categorising cryptocurrencies as an asset class, such as gold. Cryptocurrencies will be treated as an asset or commodity for all purposes, including taxation and as per use case – payment, investment or utility,
ET first reported on September 3.

This will be the first time cryptocurrencies are going to categorised as per the technology they use, but the government’s focus will be on the end use of the asset for regulatory purposes, sources said. The bill is also expected to outline the tax treatment for crypto assets including NFTs, said people in the know.

NFTs are picking up adherents rapidly in India. Earlier this year, Vignesh ‘Metakovan’ Sundaresan
paid a record $69.3 million for Mike ‘Beeple’ Winkelmann’s Everydays: The First 5000 Days.

“We saw a rise of investors of an age group between 25 and 35 years in the past few days, and most of these investors are seeking more advice on NFTs than cryptocurrencies,” said Hitesh Malviya, founder, itsblockchain.com. “Art collectors, celebrities, and sports athletes are the new class of audience that recently emerged after the massive success of NFTs.”

There is confusion over how to regulate and tax crypto assets – both income tax and goods and services tax (GST). That’s mainly because there is no clarity on whether cryptocurrency is currency, commodity, or equity.