Cryptocurrencies have recently made headlines because tax officials believe they can be used to launder money and avoid taxes. Even the Supreme Court has established a task force to investigate black money to prevent trade in these coins. While China has reportedly banned some of its largest Bitcoin trading companies, countries like the United States and Canada have passed laws restricting the trading of cryptocurrency stocks.
What is cryptocurrency?
As the name suggests, the cryptocurrency uses encrypted codes to complete a transaction. These codes are recognized by other computers in the user community. Instead of using paper money, an online ledger is updated with regular accounting data. The buyer’s account is debited, and the seller’s account is credited in this currency.
How are cryptocurrency transactions carried out?
When a single user initiates a transaction, their computer sends a code or public key that interacts with the private encryption of the person who receives the coin. When the recipient accepts the transaction, the initiating computer associates a code with a block of several of these encrypted codes known to each user on the network. Special users are known as “miners,” can link the additional code to the publicly shared block by solving a cryptographic problem to earn more cryptocurrencies. Once a miner has confirmed a transaction, the block’s record can no longer be changed or deleted.
For example, online bitcoin trading app can also be used on mobile devices to make purchases. All you have to do is ask the recipient to scan a QR code from an app on their smartphone or see it in person using near field communication (NFC). Please note this is very similar to classic online wallets like PayTM or MobiQuick.
BitCoin’s unconditional users swear for its decentralization, international acceptance, anonymity, transaction stability, and data security. Unlike paper money, no central bank controls inflationary pressure on the cryptocurrency. The transaction books are stored on a peer-to-peer network. This means that each computer chip is stored in its computing power and copies of databases on each of these network nodes. Banks, in turn, store transaction data in central deposits of people hired by the company.
How can cryptocurrency be used for money laundering?
The simple fact that central banks or tax authorities do not control cryptocurrency transactions means that transactions cannot always be tagged for a specific person. This means that we do not know if the transaction legally acquired the store or not. The transaction holder’s store is also suspicious because no one can say what compensation was given for the money received.
What does Indian law say about these virtual currencies?
Virtual currencies or cryptocurrencies are often viewed as software and are therefore classified as property under the Merchandise Act of 1930.
They would have a good indirect tax on their sale or purchase and the GST on minors’ services.
There is still a lot of confusion about the validity of cryptocurrencies in India, and the RBI, which has clearing and payment systems as well as prepaid trading tools, has been buying and certainly not allowed to sell through this medium of exchange. . .
Therefore, all cryptocurrencies received by a resident of India are subject to the Foreign Exchange Management Act of 1999 as imports of goods.
India has approved the trading of BitCoins on special exchanges with built-in safeguards against tax evasion or money laundering and the application of Know Your Customer standards. These exchanges include Zebpay, Unocoin, and Coinsecure.
For example, those who invest in BitCoins will have to pay the dividends received.
Capital gains from the sale of securities with virtual currencies can also be taxed as income and, therefore, as an online filing of computer-assisted returns.
If your investments in this currency are large, it is better to contact a personal tax authority. Online platforms have greatly simplified the tax compliance process.
