The Indian Bitcoin community, which initially had only a handful of people saw a sudden influx of new members following the government’s overnight decision to demonetize certain high-value currency notes. With two of the largest denominations, INR 1000 and INR 500 losing their value, many people decided to minimize their dependency on the country’ legal tender which is subject to the whims and fancies of the government, making Bitcoin the obvious choice. Since then, the country’s Bitcoin community has continued to witness untethered growth.
In spite of the positive growth, not many people are still convinced about the validity and legality of Bitcoin. A recent article on one of the country’s news publication attempts to clarify the present legal status of the digital currency and the recent initiative by the government to introduce cryptocurrency regulations.
The country’s central bank, Reserve Bank of India has on multiple occasions warned people about the risks associated with Bitcoin and other digital currencies. These warnings had many believe that it is illegal to use or possess Bitcoin in the country. The article clarifies that Bitcoin as of now doesn’t have a legal status and it is definitely not illegal in the country. The situation may soon change as the Ministry of Finance could soon introduce Bitcoin regulations to govern the use of cryptocurrencies within India.
The implementation of Bitcoin regulations will automatically bring cryptocurrency related dealings under the purview of Income Tax Act. Currently, profits or gains from trading Bitcoin is considered as income and applicable taxes as well as exemptions will be relevant to such transactions. The article further clarifies that there are no taxes applicable on purchase of Bitcoin and the same holds good for holding them as well, at least until they are sold or exchanged to avail other benefits in cash or kind.
According to reports, there are speculations about the introduction of capital gains taxes on Bitcoin and other cryptocurrency holdings. Short-term holdings may incur a tax of 30% on profits whereas gains from long-term holdings could be taxed at 20%. The exact tax slabs will be clear only after the implementation of Bitcoin regulations. But until then, the details provided in the article should help people understand the cryptocurrency better, with respect to existing regulations.
Ref: DNA | Image: NewsBTC