Bitcoin is a peer-to-peer currency that is decentralized and not controlled or monitored by any government or central bank of any country. Intervention from the banks is not needed in order to carry out cross border transactions in the world of digital currency. The use of middleman is eliminated which makes the transaction process smooth, efficient and without any transaction costs.
The position of bitcoin is being discussed at global level. Bitcoin in India is not regulated or controlled by any entity or government. However, the recent aspect that draws the attention of investors towards cryptocurrency in India is the issue of taxation. Under the Indian tax laws, no one can escape taxes.
Earlier this year, reports emerged that stated India wants to collect taxes from the investors who are investing in cryptocurrency. The tax department of India issued a statement under which a total of 10,000 people were sent notices to pay taxes. The step was taken after the government found out that in a period of just 17 months, a transaction of $3.5 billion has taken place. The data was collected from nine exchanges that exist in cities like Mumbai, Delhi, Bengaluru and Pune.
The tax department wants the investors dealing in cryptocurrency to pay taxes on the capital gains. The tax department of India wishes to further investigate the total holdings of the investors who are investing in digital currency. They are also planning to find out the source of income of every investor who is involved in the transaction process of digital currency. It seems like India is also worried as more and more citizens are trading their money on offshore and foreign exchanges.
The tax department further states:
We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for. Considering cryptocurrencies are here to stay, the government must consider granting limited legality while ensuring that these are not used for crypto crimes.
An article published in Bloomberg stated that the government might levy a GST of 18% on the trading of digital currency regardless of the fact that India banned the central bank and other banks from dealing in digital currencies or providing a trading platform to the citizens of India. It was also pointed out in the article that the transaction of cryptocurrency would be based solely on the value in rupees or it would be equivalent to the freely convertible foreign currency.
The articles states:
The Income Tax Department also issued notices to cryptocurrency traders and is trying to recover dues. If such virtual currencies aren’t proactively taxed, the liability would increase and make recovery difficult.
There are a lot of speculations regarding India launching its own cryptocurrency soon. The government is coming up with ways that can help them learn more about digital currencies so that they can launch their own cryptocurrency. The blueprint of the digital currency would be ready by September 2018. Whereas, the guidelines pertaining to the use of digital currency would be released in the first week of same month.
Not only India but also countries like China, South Korea etc., are also facing the same situation. South Korea has recently enacted a legislation that would be monitoring exchanges and it will also ensure that the creation of new anonymous cryptocurrency accounts do not take place. Furthermore, China is also taking an initiative to launch its own digital currency so that people invest in their own country rather than investing in other overseas cryptocurrency accounts. China also banned its banks from dealing in cryptocurrency.
India is trying its level best to cope up with the pace of other countries. However, all countries are standing at the same route yet every country is taking a different direction in order to reach its goals. Whether national cryptocurrency can be as successful as a global one like Bitcoin, is an interesting dimension that investors would like to explore.