Cryptocurrencies have been in the news lately, as tax authorities believe they can be used to launder money and evade tax. Even the Supreme Court has appointed a special Investigative Panel on Black Money to recommend trading in such currency. Although China has been banned by some of the largest Bitcoin trading operators, countries such as the US and Canada have laws that restrict cryptocurrency trading.
What is Cryptocurrency?
Cryptocurrency, as the name implies, uses encrypted codes to perform a transaction. These codes are recognized by other computers in the user community. Instead of using paper money, an online account is updated with regular accounting entries. The buyer's account is debited and the seller's account is billed in that currency.
How Do Cryptocurrency Transactions Work?
When a transaction is initiated by a user, his or her computer sends a common password or public key that interacts with the recipient's personal password. If the recipient accepts the transaction, the initiating computer connects a piece of block to a few such encrypted codes that are known to each user in the network. & # 39; Miners & # 39; Customers called additional code can add cryptographic puzzles to the shared blockchain and gain more cryptocurrency during this time. Once a miner approves an operation, the mark on the block cannot be changed or deleted.
BitCoin, for example, can also be used on mobile devices for shopping. All you have to do is allow the recipient to scan a QR code from an application on your smartphone or face them using Near Field Communication (NFC). Note that this is very similar to regular online wallets like PayTM or MobiQuick.
Die-hard users swear by BitCoin's decentralized nature, international acceptance, anonymity, transaction continuity and data security. Unlike paper currency, no Central Bank monitors inflationary pressures on cryptocurrency. Transaction books are stored on the Peer-to-Peer network. This means that each computer chip and database copies of computing power are stored in each such node on the network. Banks, on the other hand, store operational information in central deposits held by the firm's hired individuals.
How can Cryptocurrency be used for money laundering?
Lack of control over cryptocurrency transactions by central banks or tax authorities means that transactions cannot always be labeled with a specific person. We do not know if this tractor is legally acquired. The Transactor's shop is also in doubt because nobody knows what currency is taken into account.
What does the Indian Law say about such virtual currencies?
Virtual Currencies or cryptocurrencies are generally viewed as application pieces and are therefore classified under the Goods Sales Act of 1930.
They can be used for sale or purchase, as well as good, indirect taxes, such as GST on the services provided by the miners.
There is still some confusion as to whether cryptocurrencies in India are currency-friendly, and RBI, which has powers over clearing and payment systems and prepaid negotiation tools, of course, does not permit trading through this exchange.
Any cryptocurrencies acquired by a resident in India will thus be subject to the Foreign Currency Management Act 1999, as it imports goods into that country.
India has allowed BitCoins to trade with tax evasion or money laundering activities and special safeguards to comply with your customer's standards in Private Exchange transactions. These exchanges include Zebpay, Unocoin and Coinsecure.
For example, those investing in BitCoins are responsible for the dividends earned.
Capital gains resulting from the sale of securities related to virtual currencies also need to be taxed as income and then require the submission of IT documents online.
If you have a large investment in this currency, it's better to get personalized tax help. Online platforms have long simplified the tax compliance process.