A cryptocurrency is a form of virtual asset based on a network that is scattered across a huge number of computers. It is a decentralized form that allows cryptocurrency to exist outside the control of the central government or authorities
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was introduced in the Lok Sabha. The bill seeks to create a favorable framework for the creation of digital currency that will be issued by the Reserve Bank Of India (RBI).
▪︎ What The Ministry Of Finance Said On Crypto Bill In Parliament
The Cryptocurrency Bill was scheduled in the year 2021, in the Winter Session of the Parliament but it didn’t happen. However, in the current Lok Sabha session, the Ministry of Finance was questioned about the Bill.
The question was raised as to: What is the current status of the Cryptocurrency Bill? When will it be tabled and be open for inputs? Which ministry/department will regulate the virtual assets like cryptocurrencies, non-fungible tokens (NFTs) , decentralized applications, real estate tokens and other assets.
The Minister of State Finance, Shri Pankaj Chaudhary, on behalf of the Ministry of Finance answered the questions by saying, “Crypto assets are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation on the subject can be effective only with significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.” He later added that the policy-related ecosystem and crypto assets are with the Ministry of Finance.
The government of India was scheduled to introduce new cryptocurrency regulations during the Winter Session of Parliament. This was the second time that the Cryptocurrency bill was listed but got delayed. The first time it happened was during the Budget Session of Parliament in 2021.
▪︎ Is Cryptocurrency In India Legal or Not?
Cryptocurrencies as a payment medium in India are not regulated by any central authority. There are no rules and regulations or any guidelines laid down for settling disputes while dealing with cryptocurrency. So, trading in cryptocurrency is done at investors’ risk.
The Finance Minister of India, Nirmala Sitharaman, proposed to tax digital assets and has increased the debate on the legality of cryptocurrencies in the country. While many have embraced the decision to tax virtual currency as it is the first step to recognizing it, the government is yet to pass any official clarification on this matter of whether currencies like Bitcoin are legal or not in India.
Based on the various key statements made by the Reserve Bank Of India Governor as well as various government spokespersons including the Finance Minister of the country, one can conclude that cryptocurrency is illegal, but there is no certain ban on it in India. They are unregulated but according to the recent Union Budget 2022, the government of India announced a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source.
▪︎ Cryptocurrency Tax In India: What We Know So Far
Tax on cryptocurrency is one of the most confusing aspects in India. Initially, there was no Income Tax Act or Goods and Services Tax (GST) defined cryptocurrencies in India. In the recent Union Budget 2022 outcome, the Finance Minister presented a tax regime for virtual or digital assets that include cryptocurrencies.
▪︎Cryptocurrency investors are required to report the calculated profits and losses as a part of their income.
▪︎If you face any loss from the virtual asset investment, it cannot be balanced against other income.
▪︎A 30% tax will be charged on the earnings from the transfer of digital assets that include cryptocurrencies, NFTs, etc.
▪︎Just the cost of acquisition and no deduction will be permitted while reporting earnings from the transfer of virtual assets.
▪︎A 1% deduction of tax deducted at source (TDS) on the buyer’s payment if it crosses the threshold limit.
▪︎Just the cost of acquisition and no deduction will be permitted while reporting earnings from the transfer of virtual assets.
Cryptocurrency Bill: The Road Ahead
The Cryptocurrency Bill 2021, is a legislative initiative that was introduced in the Lok Sabha by the government to regulate the thriving market of cryptocurrency in India. The industry has seen a rush in investment in the last few years, especially during the covid period not just domestically but also internationally.
Crypto trading platforms like WazirX, CoinDCX, Zebpay, etc. in India are witnessing a big leap in volumes. An unregulated crypto market is unfavorable and risky even when the government wants to protect young entrepreneurs and investors. By introducing the Cryptocurrency Bill in 2021, the government officially took a step toward regulating cryptocurrency. The bill seeks to create a favorable structure for the creation of the official digital currency that will be issued by the Reserve Bank Of India (RBI). It also prohibits all other private cryptocurrencies but, with certain exceptions to boost the underlying technology of cryptocurrency. In the Union Budget of 2022, the government already took the step of imposing a 30% tax and 1% TDS on gains from virtual digital assets or cryptocurrencies.
▪︎ Why does cryptocurrency need regulation?
Regulation of cryptocurrency makes a safer marketplace that will build more confidence and turn out to be a good thing for people who wish to invest in them and will often lead to higher prices over time.
Terror financing through cryptocurrency is a global worry voiced first by the Indian government. An unregulated system has more chances to fund illegal activities. Cryptocurrency exchanges need huge investments in terms of technology to detect any foul transactions that are suspicious.
With regulation, outside manipulation will not affect the market much. It will still be a risky investment market, but with regulation, it will be stabilized and reduce some risk for investors.