RBI has not yet given currency status to cryptocurrencies. In such a situation, the tax on the income earned from it is certain, but how it will be felt, the picture is not clear.
When it comes to cryptocurrency, bitcoin is the most popular and at the same time it is also the world’s first digital currency. The craze for cryptocurrencies has increased in the last few years and currently there are around 1500 virtual currencies in circulation. This includes digital currencies like Ethereum, Ripple, Dogecoin.
Announcing the monetary policy, once again Reserve Bank Governor Shaktikanta Das said that RBI stands by its view on cryptocurrencies and does not support it. According to a report published in the Economic Times, on a daily basis, 50 lakh traders in the country are trading 1500 bitcoins on a daily basis with the help of 24 exchanges. This value is around Rs 100 crore. According to the report of Money Control, there has been a 400% jump in cryptocurrency trading in the Corona lockdown.
Cryptocurrencies have not been banned since the Supreme Court order of March 2020, but what the government is thinking is not yet known. However, on 24 March 2021, the Ministry of Corporate Affairs said that it is necessary for companies to disclose transactions and profits in cryptocurrencies. It is necessary for companies to state how much they have invested in crypto assets. Talking about the tax, there is no provision in the Income Tax Act 1961 regarding earning from cryptocurrencies so far. In such a situation, the tax department itself is in a state of confusion. It will be difficult to say what will be the situation regarding this in our country, but we know about the rules regarding this in foreign countries.
In the US, it has been given property status. In such a situation, the tax rules should also be similar. For a business entity in Singapore, it is counted as a profit. If the entity invests for the long term, then no tax is levied as there is no capital gains tax. Talking about the UK, there is a tax rule on the basis of trading and capital gains on investment.
Talk about the taxation of cryptocurrency in India, if it is given the status of currency in the coming time, then no tax will be levied. RBI has not given it currency status yet. On the other hand, if it is treated like property and goods, then capital gains tax will be levied on the investment. Or else it will come under Profit from Business Profession.
Anurag Thakur had said on 28 March 2021 that the earnings from cryptocurrencies will be taxable and will be seen as income. This makes it clear that India will move towards taxing cryptocurrencies. If it is bought for investment purpose, then it will attract capital gains tax whereas on trading it will come under the ambit of profit from business and tax will also be applicable according to the same rules.