Union Budget 2018: The government of India does not consider cyrpto-currencies as legitimate, but it will explore the use of block chain technologies, according to the Finance Minister Arun Jaitely. Government all over the world is showing no mercy to cryptocoins. The Government does not consider cyrpto-currencies as legitimate but will explore the use of blockchain technologies, said Finance Minister Arun Jaitley during his Union Budget 2018. "All crypto currencies, which include bitcoins, are illegal and the government will take all measures to eliminate their use" - Arun Jaitely This statement had a huge impact on Indian crypto market which has a 11% share in World Crypto market. Bitcoin which was trading before the Budget at $10,983 in India is now trading at $9,100 on Indian exchange Zebpay. But i don't think it will put an end to crypto coins in India. The government will come up with some regulations to tackle illegal transactions and tax evasi...
WHAT IS A CRYPTOCURRENCY?
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
SOURCES OF INCOME FROM CRYPTOCURRENCY:
The different ways to get Income from Cryptocurrency are:
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
SOURCES OF INCOME FROM CRYPTOCURRENCY:
The different ways to get Income from Cryptocurrency are:
- Mining them.
- Trading Cryptocurrency on Exchanges
- Receiving them in return for sale of Goods/Services.
IS CRYPTOCURRENCY LEGAL IN INDIA?
Cryptocurrency as a medium of payment, has neither been authorized nor been regulated by any central authority in India. Further, no set rules, regulations or guidelines have been laid down for resolving disputes that could arise while dealing with bitcoins. Hence, bitcoin transactions come with their own set of risks. However, given this background, one cannot conclude that bitcoins are illegal as, so far, there has been no ban on bitcoins in India.
TAXABILITY OF BITCOIN TRANSACTIONS IN INDIA:
"Yes Any Income from Cryptocurrency is taxable in India".
- The Indian taxation laws always keep the meaning of income so wide that that taxmen will always bring some interpretation to include it.
- Section 2(24) of the I.T.Act defines income .This definition is considered inclusive definition which means every kind of income which are not even indicated therein are taxed in hands of receiver.
IS IT A CAPITAL INCOME OR A SPECULATIVE INCOME?
In case of Trading Cryptocurrency on Exchanges:
As per Section 2(14) the term “capital asset” means:
(a) property of any kind held by an assessee, whether or not connected with his business or profession;
(b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992;
but does not include:
(i) any stock-in-trade, other than the securities referred to in sub-clause (b), consumable stores or raw materials held for the purposes of his business or profession;
(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes:
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
Here is another provision from the Act under section 43 (5) where "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrip.
From the above we can conclude the following:
Property of any kind is broader term as envisaged in above provisions. Hence, Cryptocurrency is a capital asset if it is taken for investment purposes. If it is held for more than 36 months, long term capital gain of 20 % shall be applicable and if held for less than 36 months, short term capital gains tax of 30% shall be applicable (the case being you fall in the slab of 30% and likewise for short term capital gains). I am assuming that it would be classified as other assets under capital asset
Trading Cryptocurrency is a speculative transaction and should be treated like other commodity only. Hence, any revenue would be regarded as income from speculative business which falls under Head of Profession/Business. The underlying reason is that Trading in Cryptocurrency is settled otherwise than by the actual delivery . So, trading it would be speculative transaction.
In case of Mining:
Where as in case of Mining Cryptocurrency it is a complicated task as to the treatment of such cases. It can be treated as similar to self-generated assets. The cost of mining the bitcoin can be ascertained in this scenario. Therefore, both the 3 year rule and indexation benefit shall be applicable.
Receiving them in Return for sale of Goods/Services:
It is taxed as profit from business according to your individual tax slab rate.
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