The finance ministers budget speech left enthusiast buzzing about cryptocurrency. “Cryptocurrency is it legal or not legal “.
But what did the FM actually say “Government will not consider it legal tender and will not promote its use, will use all measures to eliminate in financing illegal activities”. The FM Jaitley made it clear the government is not against the blockchain technology, on which most cryptocurrency work. The government will not promote the use of cryptocurrency.
Ajeet Khurana who heads the Blockchain and Cryptocurrency Committee of India (BACC) welcomed FM’s remark on cryptocurrency and said the step may be a possibility in future to check the illicit activity.
There is always myth concerning cryptocurrency in India.
Is cryptocurrency legal in India?
Since no ban has been laid on cryptocurrency. It has neither been authorized nor has been regulated by the government. It is at the risk of the investors as no set of rules, regulations or guidelines has been laid down for resolving disputes that would arise from trading.
However, with this scenario, it cannot be concluded that cryptocurrency is illegal and so far, there has been no ban on bitcoins in India unlike countries where it has been banned by country’s Central Banking system, some are banned by the nation’s government.
It is said,” Even if cryptocurrency were illegal, income earned through trading or on the purchase of goods needs to be declared and tax paid,” says an I-T official.
How Cryptocurrency are taxed in India?
Cryptocurrency trading is like shares or physical assets. That means you pay the long-term capital rate if you sold it after a year, or the ordinary income rate if you sold it before then. Anything that you earn is income and in India, laws have always sought to tax income received irrespective of the form in which it is received.
The possibility of tax on bitcoins can be under the circumstances
- When the transactions in bitcoins are substantial and frequent, i.e when trading in bitcoins. In this case, income from the sale of bitcoins would be a business income. In this case, applicable slab rate of income tax would apply.
- If bitcoins, which are capital assets, have been held as an investment and are transferred in exchange for real currency, the appreciation in value would give rise to a long term capital gain or a short term capital gain depending on the period of holding of the bitcoin. Further, long term gains would be taxed at a flat rate of 20% while short-term gains would be taxed at the individual slab rate. The cost of acquisition for arriving at long term capital gains will be determined after giving the benefit of indexation.
- Bitcoins being received on sale of goods and services. Accordingly, gain or loss is recognized every time that Bitcoin is used to purchase goods or services. same time, levy of tax on bitcoins cannot be ruled out because the Indian income tax laws have always sought to tax income received irrespective of the form in which it is received.
This chart by clear tax gives a clear picture of the tax frame in India.
