Cryptocurrency has been in the news lately because tax authorities believe that cryptocurrency can be used for money laundering and tax evasion. Even the Supreme Court has appointed a special investigation team on black money, recommending not to use this currency for transactions. 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 restrict cryptocurrency stock trading.
What is cryptocurrency?
As the name suggests, cryptocurrencies use encrypted codes for transactions. These codes can be recognized by other computers in the user community. No need to use paper money, but to update the online ledger through ordinary bookkeeping entries. The buyer’s account is debited, and the seller’s account is credited in that currency.
How to conduct cryptocurrency transactions?
When a user initiates a transaction, her computer issues a public password or public key that interacts with the private password of the recipient of the currency. If the recipient accepts the transaction, the startup computer will attach a piece of code to several blocks of this encrypted code known to every user in the network. Special users named “miners” can solve cryptographic puzzles, attach additional codes to public shared blocks, and earn more cryptocurrency in the process. Once the miner confirms the transaction, the record in the block cannot be changed or deleted.
For example, BitCoin can also be used on mobile devices to make purchases. All you need to do is to 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 ordinary online wallets such as PayTM or MobiQuick.
Stubborn users swear by BitCoin’s decentralization, international recognition, anonymity, transaction permanence and data security. Unlike paper money, no central bank can control the inflationary pressures of cryptocurrencies. The transaction ledger is stored in a peer-to-peer network. This means that every computer will use its computing power and store a copy of the database on every such node in the network. On the other hand, banks store transaction data in central repositories, which are privately owned by companies employed.
How can cryptocurrency be used for money laundering?
The fact that the central bank or tax authorities cannot control cryptocurrency transactions means that transactions cannot always be marked as specific individuals. This means that we do not know whether the trader has legally obtained the store of value. Traders’ shops are also under suspicion, because no one can say what they think about the currency they receive.
What does Indian law say about this virtual currency?
Virtual currency or cryptocurrency is generally regarded as software and therefore classified as a commodity under the Goods Sale Act of 1930.
Good indirect taxes are levied on their sales or purchases, and GST is levied on the services provided by miners.
There is still a lot of confusion as to whether cryptocurrency can be effective as a currency in India. The Reserve Bank of India has the power to clear and pay the system and prepaid negotiable bills. Of course, it does not authorize buying and selling through this medium of exchange.
Therefore, any cryptocurrency received by Indian residents will be controlled by the 1999 “Foreign Exchange Control Act” as the country’s commodity imports.
India allows tax evasion or money laundering activities with built-in safeguards and built-in safeguards that implement the “know your customer” specification to conduct bitcoin transactions on special exchanges. These exchanges include Zebpay, Unocoin and Coinsecure.
For example, those who invest in Bitcoin are responsible for charging fees for dividends received.
Capital gains from the sale of securities involving virtual currencies should also be taxed as income, and then an IT declaration form should be filed online.
If you are investing heavily in this currency, it is best to get the help of personalized tax services. The online platform has greatly simplified the tax compliance process.