In a written response to Lok Sabha, Finance Minister Nirmala Sitharaman had said that the RBI was in favor of banning cryptocurrencies and that she had told the ministry that they could not be considered legal tender because they are not issued by the RBI. Given the concerns expressed by the RBI regarding the destabilizing effect of cryptocurrencies on a country`s monetary and fiscal stability, the RBI recommended that legislation be enacted in this sector. The RBI believes that cryptocurrencies should be banned,” reads Sitharaman`s response to the Lok Sabha. Taxation must not be abandoned, which is why the budget announced taxes. The FSB report would help solve this problem, whether crypto should be banned or not. And that requires international regulations. A ban only in India would keep the site open to cross-border transactions via wallets,” the official said. If the RBI and SEBI allow you to trade an asset, it usually means that you also have to pay capital gains taxes. Similarly, cryptocurrency trading is legal in India, which means it has a tax. 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. But there is only one country where crypto trading is allowed and used as legal tender.
This is the Central American country of El Salvador 🇸🇻, which was the first country to fully legalize Bitcoin. One of the most criticized aspects of crypto tax law in India is that losses are not accounted for, which means you cannot offset capital gains with business losses or expenses. In an industry where losses are more common than profits, this clause is a clear attempt to curb cryptocurrency transactions. A report from the Financial Stability Board (FSB), expected in October, will help the government decide whether to ban cryptocurrency transactions via wallets and provide a legal framework to deal with cryptocurrency trading in India, a senior government official told Outlook Business. Finance Minister Nirmala Sitharaman`s proposal to tax virtual assets has sparked a debate about the legality of cryptocurrencies in India. While many have welcomed the decision to tax digital currencies, believing it to be the first step towards the recognition of virtual currencies, the government has yet to clarify whether currencies like Bitcoin can be considered legal tender in India. The legality of crypto is much discussed around the world. But the term itself is quite vague. In some countries, crypto trading is legal. This includes countries like India, the United States, Canada, Mexico and others. “The others are not legal tender, will never be. Bitcoin, Ethereum or any image of an actor that becomes NFT will never become legal tender,” he told ANI.
– Somanathan also stated that the digital rupee will not be like Bitcoin and Ethereum. “With the digital rupee, you make your transaction as you do now through your digital wallets like Paytm, UPI. The digital rupee is legal tender and is synonymous with cash payments that we make,” he said. Officially, however, India has not yet decided whether cryptocurrencies are legal. First things first: cryptocurrency won`t be illegal in India from November 24, 2021. This statement has two implications: The RBI has vehemently opposed cryptocurrencies. Governor Shaktikanta Das has claimed more than once that cryptocurrencies pose a threat to the country and that anything whose value is derived solely from conjecture is speculative in nature. The central bank has identified a number of risks associated with cryptocurrency asset markets, including the links between these markets and the regulated banking system. “Identifying and quantifying the risks posed by crypto assets faces data gap challenges,” the RBI has said in the past. The other concern of some exchanges is whether crypto will be banned after they have all been put under the control net.
The concern is that if all crypto-related activities are subject to a tax system, it might be easier to ban these activities altogether. The proposed new tax on cryptocurrencies will apply from the 2023-2024 assessment year. This means that all your income from crypto transactions will be taxed at a rate of 30% in the 2022-23 fiscal year. Investors will have to pay taxes under existing tax rules for the 2021-2022 fiscal year. But whether withholding taxes are levied or not depends on how many investors trade on the stock exchange and who they are. 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. Around the world, many use crypto assets as a means of payment due to the ease of global transfer and lower transaction costs than bank transfers. However, the Indian government does not grant legal tender to cryptocurrencies or Bitcoin. And we may not see the government do that anytime soon. In 2022, the government took the first steps to regulate cryptocurrencies through the proposed tax system.