In layman Language, Crypto currencies are digital currencies designed to buy goods and services, similar to our other used currencies.Today more than 1400 virtual currencies such as Bitcoin, Lite coin, Ripple, and Matic, etc. are traded in the digital currency world.
Since the nationwide lock-down, the investment and trading of crypto currencies have increased multi-fold. Bitcoin and Ether are the two most popular crypto assets.
Is Crypto defined as ‘Currency ‘or ‘Asset’?
Tax Experts have been contemplating the classification of the cryptocurrency between ‘currency’ or an ‘asset’. Cryptocurrency and crypto assests are the names largely used interchangeably. However classifying it as a currency needs some legal implications by Government. In absence of which it is safe to classify it as an ‘Asset/Property’.
A Cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of crypto currency. Tasks are further classified via internet among cryptocurrency users.
Crypto can be used to buy regular goods and services, although most people invest in cryptocurrencies like other assets, stocks or other precious metals.
Regulations Regarding Crypto:
India is closer to getting cryptocurrency regulations than ever before. Two important meetings in this regard have taken place over the past week. First, Prime Minister Narendra Modi chaired a high level comprehensive meeting, where he talked about the concerns of unregulated crypto markets as they are allowing money laundering and terror financing. Further Parliamentary Panel met the experts to find future path of crypto currencies.
As of now, anyone with a working internet connection can make a crypto coin. The regulations may ensure that only those who fulfill certain criteria are able to create crypto.
Crypto will not become a legal tender. Earlier this year, a lot of people rallied behind the idea of cryptocurrency replacing the rupee or co-existing with it as a legal tender. That is highly unlikely now. In simple words, you will not be able to use Bitcoin to purchase a burger or pizza.
One important thing that remains to be seen is who will regulate cryptocurrencies. The Reserve Bank of India (RBI) seems to be the most logical option but has expressed intentions of introducing its own crypto. The other possible option among the existing organisations is SEBI. It won't be surprising if the government comes up with a new body altogether for regulating crypto.
Classification of Nature of Crypto Transaction
If it is considered as Business Income and the purpose is of short term trading, then it will be taxable at Slab rates (GST applicability to be examined.)
If it is considered as Capital Gains and the purpose is of long term trading, if it holds less than or equal to 3 years considered as short term capital gain and taxable at slab rates .
If Holds for more than 3 years then it is considered as long term capital gain and taxable at 20% with indexation.
Future of Crypto currencies
Analysts estimate that the global cryptocurrency market will be more than triple by 2030 hitting a valuation of nearly $5 billion. Whether they want to buy into it or not, investors, businesses and brands can’t ignore the rising tide of crypto for long.
Crypto Currency will make the world better place by changing this process. Blockchain technology, which is behind crypto currency, cannot be changed like traditional currency. Using the crypto and block chain technologies keeps companies and individuals accountable.