Cryptocurrency in India is different from the rest of the world: Find out how?
India embraced the development of cryptocurrencies wholeheartedly. While only a few businesses are accepting payment in Bitcoins, it is clear that people are looking at crypto as an investment as well as a commodity. Cryptocurrency has constantly been in the news and held media attention and waiting for a final verdict and regulatory guidelines from the government. RBI has recently announced the creation of a special team to nail down the crypto rules. Since cryptocurrency is controlled only by the community and the blockchain, there is very little interference possible in the functioning of cryptocurrency.
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The preferred asset of the young investor
Cryptocurrency is not the traditional investment that the older generation is used to. It is more dynamic and requires constant care and attention for it to grow. Unlike a deposit in a bank, cryptocurrency has to be monitored and the investor needs to be vigilant about the status and price of cryptocurrencies. The risk is much higher and the reward is much bigger. The newer business minds are prepared to take the necessary steps to make their money grow. Approximately over 10 million investors were added by India in the year 2021 to the mix of investors from all over the world. The freedom of buying even a small fraction of a cryptocurrency if you don’t have the capital for 1 token, is encouraging young adults to invest in cryptocurrency (sometimes even with their pocket money!).
Tax implications of cryptocurrency in India
Entry of cryptocurrency in the business world and as digital currency has blurred the lines of the previous definition of income tax, income, loss, and gain. RBI is yet to grant any cryptocurrency the status of legal tender in India. Hence. There are no specific rules that can be enforced that define the taxability for crypto. Financial advisors and experts have speculated the nature of regulations that may come into play at a later date. As of now, companies must disclose cryptocurrency investments/trading during the financial year.
Taxation under the Central Goods and Services Tax Act
Any business activity pertaining to crypto, unless specifically exempted, is taxable under the CGST Act. Indian exchange platforms already charge GST from their users. This indirect tax would be charged to you as a part of the trading fee. When you buy or sell Ethereum, the Ethereum price in INR includes the tax as well. The trading platforms pay taxes to the government as they are conducting business.
Recently, a proposal has been raised and is being considered by the government to bring cryptocurrency exchanges and platforms under the GST umbrella. It has suggested that cryptocurrency mining be treated as a supply of service as it generates cryptocurrency and charges transaction fees, and as such, should classify as an intangible asset and attract a GST of 18 percent. It has also been proposed that the taxpayers operating as cryptocurrency miners will be required to register under GST if their annual revenue exceeds INR 2 million. GST will be levied on the transaction fee and/or the reward, which is the currency mined. Recent reports also suggest that foreign crypto exchanges in India might have to pay GST at 18 percent on cryptocurrency transactions in India.
Most of these speculations by the experts are still being considered and crypto enthusiasts are still waiting for firm directives from the government.
India and the rest of the countries with respect to cryptocurrencies
While it is legal to trade and use cryptocurrency in India for payments, the lines of legality are still blurred. There has been a tremendous increase in the volume of the crypto trade giving rise to a number of exchange platforms in the country. While India is still figuring out the way to build crypto inclusive infrastructures, the U.S. has already moved on to making the usage simpler. There are ATMs across the country to speed up the process of conversions and make using cryptocurrencies easier. There are a few online stores that have started accepting payments in Bitcoin in India. In other countries, you can buy a goat, groceries, and even a trip to outer space using cryptocurrency.
The pace at which the crypto ecosystem is being built in India is a little slower than the rest of the world. However, India has embraced the change in the financial future of the world and is ready to be a part of it and thrive.