Since the concept of bitcoins is quite new in the Indian market, the government has apparently not yet included bitcoin tax liability in the law books. At the same time, the collection of the bitcoin tax cannot be ruled out, as India`s income tax laws have always tried to tax the income received, regardless of the form in which it is received. Therefore, the possibility of taxing bitcoins can be considered in the following circumstances: CBDT Chairman Mohapatra pointed out that even if crypto trading is made illegal by legislation, trading profits will continue to be taxed. The word „digital“ is used because cryptocurrencies or NFTs are a digital representation and not a legal tender that you can hold in your hand like a 100 rupee note. Income from Bitcoin`s trading activity would translate into income from trading activity and, therefore, profits from that activity would be subject to tax at individual slab rates. The government had previously considered using the term „crypto assets“ to show that cryptocurrencies are not legal tender and you cannot buy or sell things with them, but are instead held as an asset for investment purposes. According to experts, it is more likely that any cryptocurrency, with the exception of the digital rupee (and perhaps some of the most well-known currencies such as Bitcoin and Ether) will be banned as legal tender. Investors could trade cryptocurrencies as assets or buy NFTs, but no food or other goods. „I don`t think legal tender is given to something that is not supported by the central bank and the RBI.
Thus, even Bitcoin or any other popular currency will not receive legal tender,“ said Shehnaz Ahmed of Vidhi. Similarly, Finance Minister Tarun Bajaj explained it best in an interview, saying that the profits of cryptocurrencies are still taxable, but that the new rule „will bring certainty in the taxation of cryptocurrencies.“ Yet this new rule „says nothing about its legality that would come out once the bill (regulating these assets) is presented to parliament.“ Just because it is taxed does not mean it is legal,“ said Central Direct Tax Board (CBDT) chairman JB Mohapatra. Cryptocurrencies are not mentioned in the Indian Income Tax Act and no rules have been established. Since the Reserve Bank of India (RBI) has not yet granted legal tender to Bitcoin or any other cryptocurrency in India, there are no specific rules governing how these cryptocurrencies should be taxed. That doesn`t mean you can get away with not paying taxes on your winnings. Profits from Bitcoin sales can be taxed as business income if traded frequently, or as capital gains if held for investment purposes. However, to answer pressing questions, including „Will Bitcoin be legal in India in 2022?“ and to eliminate confusion about the tax status of cryptocurrency in India, we have answered the nine most frequently asked questions about Bitcoin`s legal status in India. The government is concerned about the use of Bitcoin for payments for illegal activities such as money laundering, tax evasion, terrorist financing, etc. The government intends to prevent the illegal use of cryptocurrencies.
However, as we discussed in a recent article, blockchains can be great forensic tools for catching malicious actors. The legal status of Bitcoin mining is unclear in India and still exists with uncertainties. Bitcoin mining requires a lot of energy and consumes about 60 terawatt hours per year. But the government effectively banned the import of ASIC machines into India in 2017. Mohapatra also said that the act of levying a tax should not be equated with the legitimacy of cryptocurrencies, according to Business Today. A veteran lawyer who requested anonymity for working with the government on crypto regulation said the government believes everything is taxable, but not everything is allowed. Illegal smuggled goods are also taxed. However, with this in mind, one cannot conclude that bitcoins are illegal, as there has been no ban on bitcoins in India so far. The Supreme Court of India, in its judgment of February 25, 2019, asked the government to develop guidelines to regulate cryptocurrency.
The hearing was adjourned at the hearing on 29 March 2019 and scheduled for the second week of July 2019. The biggest point of confusion for users as a result of the announcements is how crypto could be taxed and yet not legal. The government has refrained from suggesting that crypto is legal. As mentioned earlier, Bitcoin is legal in India, meaning you can buy, sell, and hold it as an investment, but no governing body maintains or protects it.