The Cryptocurrency and regulation bill, 2021, is under discussion by the government. Cryptocurrency Market is growing exponentially in India. As there are digital assets and digital currency for higher returns, there are vast growth opportunities. While speaking at the Sydney conference, Prime Minister Modi said that it is essential to ensure cryptocurrencies are not misused. Cyber technologies and digital currency need to be regulated. Will cryptocurrency gains be taxed in India? The answer is yes. Check the Cryptocurrency taxation guide to know more. This blog throws light on digital assets, tradable assets, short term investment and long term investment.
As per the record of the Wazirx crypto exchange, there are ten types of cryptocurrencies in India. Ethereum, wazirX, Tron, Dogecoin, Cardano, ShibaInu, Bitcoin, polygon, Solana, and tether are the ten types of cryptocurrencies with strong technology back-up. As hacking is one of the disadvantages of technology, it is essential to create a technology-based network. Blockchain help for the smooth functioning of cryptocurrency. Banks or countries are not operating these digital currencies. It is a technology-based one. Do people talk about making money from cryptocurrency trading? Yes, it is possible to make money, but along with the high degree of the risk element. Income tax on bitcoin and its legality in India helps for reducing the risk and enhance profits. Standup comics TanmayBhat, AishwaryaMohanraj, Manoj Vajpayee, RadhikaApte, SamayRaina, Manoj Bajpayee, Kunaal Roy Kapur, KushaKapila, AshishChanchlani, Vishnu Kaushal, Dolly Singh, Danish Sait, Ishant Sharma, Priya Malik, and Dinesh Karthik are the celebrities involved in promoting cryptocurrency. The social media channels used to attract buyers are YouTube, Instagram, Twitter, and Vlogs.
Crypto Currencies are asset or tradable assets:
Cryptocurrencies are used for purchases and investments as well. The difference between a crypto token and a crypto coin is the investment and purchase purpose. The crypto is an algorithm that has various encryption techniques to safeguard the entries. The tokens are raised by the cryptocurrency Company and listed as IPO initially. The investors buy these tokens. These tokens are subject to investment and taxation. Participants of blockchain technology trade the cryptocurrency. NFT is a type of digital asset and are part of the Ethereum blockchain. NFTs are a digital form of music, art, and artificial intelligence. The ownership of the NFTs have value but cannot be tradable with equivalence. During the exchange, some cryptocurrencies offer participants to view 10 hours of video content. The value added to sale cryptocurrencies is the Gaming aspect, artwork, content work, and celebrities’ marketing. Some cryptocurrencies represent ten other cryptocurrencies like bitcoin or polygon. The handy form of accessibility and timely transaction completion are the advantages of cryptocurrency. The process becomes easy and fast, as the intermediaries are not involved in the money transfer. The legal aspect of cryptocurrency needs regulations.
The two types of virtual currencies are open and closed virtual currencies. Closed virtual currencies are used for purchases, and these currencies cannot be traded. Such digital currencies are sold as gaming systems or artistic work. Open virtual money is convertible, and the conversion process is considered a trading process. Examples of this digital money are Bitcoin and Ethereum. Central Bank Digital Currency in the form of digital money sold by RBI. Etherum and Bitcoin are unregulated digital currencies. CBDCs comes under the regulated digital currency. Many countries and governments are now showing interest to implement regulation of digital money.
Short term and long term investment:
In the year 2018, Cryptocurrencies were banned in India by RBI. There are arguments about cryptocurrency as it is labelled as currency and asset. If it is processed as an asset, then it requires less legal identity. But, if it is traded as digital money, it requires legal identity or regulation. Tax calculation is common to assets and income. So, labelling it as an asset is not confusing for tax calculation. Based on the nature of income, cryptocurrencies are taxed. If the investment is short term, it is considered as business income. And if the income is for the long-term, it is capital gain. Business income is charged based on GST charges. In the case of capital gains, the two subdivisions are lesser than or equal to three years and more than three years. If the period falls under short term capital gain, it is taxable as per the slab rate. If the period falls under long term capital gain, it gets 20 per cent of indexation. If the cryptocurrency is referred to as capital gain, it will be sold as per the sale value. If it is more than the sale value, it is the capital profit, and in case of less price, it is the capital loss. If it is shown as business income, it is added to the income tax and charged.
The Central Economic Intelligence Bureau says that business houses can group crypto currency under intangible assets. And the income from such assets is charged GST, capital gains or at a flat rate of 18 per cent. It can also be shown as income from other sources. The income from other sources is attributed to the total income and accordingly taxed.
Conclusion:
As per the changes made by the government on 1st April 2021, to schedule III, Companies Act, the asset value, gains, and losses have to be disclosed in the balance sheet. This rule is to regulate the cryptocurrency market. In the year 2020, the investment by Indians in cryptocurrency touched $923 million. In US and UK, cryptocurrencies are reported as capital assets. In India, it takes the value long term assets. The government is trying to regulate cryptocurrency through the business reporting process and tax calculation. The foreign cryptocurrency exchanges get 18 percentage of GST. The exchanges, individuals and business houses pay taxes as per the government rates. The Cryptocurrency tax clients have started rising in India. The income tax calculation, fraud detection with blockchain technology and risk assessment for investments in cryptocurrencies empower the profile of chartered accountants in the global market.