Cryptocurrencies have been in the news recently because tax authorities believe they could be used to launder money and evade taxes. Even the Supreme Court appointed a Special Investigation Group on Black Money, which recommended that trade with such currency be banned. Although China has reportedly banned some of the largest Bitcoin trading operators, countries such as the United States and Canada have laws restricting cryptocurrency exchange trading.
What is cryptocurrency?
Cryptocurrency, as its name suggests, uses encrypted codes to perform transactions. These codes are recognized by other computers in the user community. Instead of using paper money, the online book is updated with regular accounting notes. In this currency, the buyer’s account is debited and the seller’s account is credited.
How are cryptocurrency transactions conducted?
When a user initiates a transaction, his computer sends a public password or public key that interacts with the recipient’s personal password. If the recipient accepts the transaction, the host computer adds a piece of code to a block of several such encrypted codes known to each user on the network. Special users called Miners can add additional code to an openly shared block by solving a cryptographic puzzle and earn more cryptocurrencies in the process. The entry in the block cannot be changed or deleted after the miner confirms the operation.
For example, BitCoin can be used both on mobile devices and for shopping. All you need to do is allow the receiver to scan the QR code from the app on your smartphone or bring them face to face using Near Field Communication (NFC). Note that this is very similar to regular online wallets like PayTM or MobiQuick.
Difficult users swear by BitCoin for its decentralized nature, international acceptance, anonymity, sustainability of transactions and data security. Unlike paper currency, no Central Bank controls inflationary pressures on cryptocurrencies. Transaction books are stored in the Peer-to-Peer network. This means that copies of each computing power chip and database are stored on each such node in the network. Banks, on the other hand, store operational information in central warehouses held by individuals employed by the firm.
How to use cryptocurrency for money laundering?
The lack of control over cryptocurrency transactions by central banks or tax authorities means that transactions cannot always be targeted at a specific person. This means that we do not know whether the transaction legally acquired the value warehouse. The buyer’s store is equally dubious, as no one can say how much attention is paid to the currency purchased.
What does Indian law say about such virtual currencies?
Virtual currencies or cryptocurrencies are commonly seen as software and are therefore classified as commodities under the 1930 Commodity Sales Act.
They will be subject to good, indirect taxes for their sale or purchase, as well as being a GST for the services provided by the Miners.
There is still considerable confusion as to whether cryptocurrencies are as reliable as currency in India, and the RBI, which has authority over clearing and payment systems and prepaid negotiation instruments, has certainly not allowed trades through this exchange.
Thus, any cryptocurrencies purchased by a resident in India will be regulated by the 1999 Foreign Exchange Management Law as imports of goods into that country.
India has allowed BitCoin trading on private exchanges with internal guarantees for tax evasion or money laundering activities and the application of Customer Identification Standards. These exchanges include Zebpay, Unocoin and Coinsecure.
For example, investors in Bitcoins are obliged to deduct from the dividends received.
Capital gains from the sale of securities involving virtual currencies should also be taxed as income, resulting in the online submission of IT returns.
If you have a large investment in this currency, it is better to get the help of an individualized tax service. Online platforms have greatly simplified the process of tax compliance.