The cryptocurrency has been news for a long time because the tax authorities believe that cryptocurrencies can be used for money laundering and tax evasion. Even the Supreme Court has appointed a special investigation team on black money, and it is recommended not to use this currency for trading. According to reports, China has banned some of the largest bitcoin trading operators, but countries such as the United States and Canada have enacted laws to limit the trading of cryptocurrency stocks.
What is cryptocurrency?
As the name suggests, cryptocurrencies use encrypted code for transactions. These codes can be identified by other computers in the user community. You can use an ordinary bookkeeping entry to update an online ledger without having to use paper money. The buyer’s account is debited and the seller’s account is credited to that currency.
How to conduct cryptocurrency transactions?
When a user initiates a transaction, her computer issues a public or public key that interacts with the private password of the person receiving the currency. If the recipient accepts the transaction, the initiating computer appends a piece of code to several such blocks of encrypted code known to each user on the network. A special user named Miner can solve the password problem by attaching additional code to the common shared block and gaining more cryptocurrency in the process. Once the miner confirms the transaction, the records in that block cannot be changed or deleted.
For example, BitCoin can also be used on mobile devices for purchases. All you need to do is have the receiver scan the QR code from the app on your smartphone or use Near Field Communication [NFC] to make it face to face. Please note that this is very similar to regular online wallets like PayTM or MobiQuick.
Stubborn users swear that BitCoin has decentralization, international recognition, anonymity, transaction persistence and data security. Unlike banknotes, there is no central bank that can control inflationary pressures on cryptocurrencies. The transaction ledger is stored in a peer-to-peer network. This means that each computer will be able to perform its computing power and store a copy of the database on each such node in the network. On the other hand, banks store transaction data in a central repository that is privately owned by the company.
How is cryptocurrency used for money laundering?
The fact that the central bank or tax authority has no control over cryptocurrency transactions means that transactions cannot always be marked as specific individuals. This means we don't know if the trader has legally obtained a value store. The trader’s store is also suspected because no one can say what to think about the currency received.
What do Indian laws think about this virtual currency?
Virtual currency or cryptocurrency is often considered software and is therefore classified as a good under the 1930 Commodity Sales Act.
As a good indirect tax, it applies to their sale and purchase, as well as the goods and services tax provided by the miners.
There is still a lot of confusion about whether cryptocurrency can be effective as a currency in India. The Reserve Bank of India has the power to clear and pay systems and prepaid negotiable instruments. The Reserve Bank of India certainly does not authorize trading through this exchange medium.
Therefore, any cryptocurrency received by Indian residents will be regulated by the 1999 Foreign Exchange Control Act as a commodity import for the country.
India allows bitcoin transactions on special exchanges with tax evasion or money laundering activities with built-in safeguards and built-in safeguards to implement the “know your customer” specification. These exchanges include Zebpay, Unocoin and Coinsecure.
For example, those who invest in Bitcoin are obligated to charge a dividend received.
Capital gains derived from the sale of securities involving virtual currency should also be taxed as income and subsequently submitted to the IT filing form online.
If you invest heavily in this currency, it's best to get help with personalized tax services. The online platform has greatly simplified the tax compliance process.