The Government of India Ministry of Electronics and Information Technology (MeitY), in January 2021 introduced its National Strategy on Blockchain last week. The government does not seem to be stopping here only.
Yes! You are reading it absolutely right. The Central Government of India plans on introducing Cryptocurrency and Regulation of Official Digital Currency Bill 2021. It was supposed to be introduced in the middle of February 2021.
The introduction of this bill has been postponed until the beginning of parliament’s new session on March 8th, 2021. This decision taken by the government created panic among crypto enthusiasts looking for new crypto assets to invest in.
In case you are one of them, learning in detail about income tax on income from cryptocurrencies in India is important for you.
If the Taxation of Cryptocurrency Block Rewards in Selected Jurisdiction, January 2021, published on the Law Library (Library of Congress) is to be trusted, the central government of India declared cryptocurrencies of all types as an illegal tender in India in 2018.
The bill titled as Banning of Cryptocurrencies d Regulation f Official Digital Currency Bill has been drafted in 2019 by the IGC (Interministerial Government Committee).
The examination of this bill by all concerned departments and regulatory authorities was put on hold because of RIT filed by someone.
In the year 2020, The Supreme Court of India studied this RIT and the logic behind it and lifted the ban imposed by the Central Government of India.
Otherwise, activities like mining, holding, selling, trading, issuance, disposal, buying cryptocurrency would have been prohibited through this bill in India.
RBI’s Take On Cryptocurrency:
The Reserve Bank of India, the biggest banking/financial solution provider in India, issued a number of circulars advising caution on the use of this decentralized digital fintech. This move by RBI has not done much favor to the crypto investors searching for new crypto assets to invest in India.
RBI warned Indian crypto traders and users about the kind of risks associated with digital and decentralized currencies. Not even a single entity or company has been authorised and licensed to operate or deal in this domain of finance.
RBIs Circular About Cryptocurrency:
The reserve bank of India issued a circular on April 6th, 2018 with the purpose of prohibiting the following from dealing in the domain of digital decentralized finance:
- All regulated financial institutions.
This circular prohibited all entities regulated by the Reserve Bank of India from the following:
- From dealing in virtual currencies.
- From providing services to facilitate any individual or entity in dealing or settling with virtual currencies.
The list of such services includes but is not limited to the following only:
- Maintaining accounts
- Account registration
- Giving loans against virtual tokens
- Accepting them as collateral
- Opening accounts of exchanges dealing with them
- Transfer/receipt of money in accounts related to the purchase or sale of decentralized virtual currencies.
According to this circular, RBI commanded all of its regulated entities to stop supporting entities and individuals dealing in the domain of decentralized virtual currencies. They will have to do so within the time period of three months from the date issuance of this circular.
Interference of Supreme Court of India:
The Supreme Court of India took notice of this issue after someone filed a RIT and advised experts to study the potential of this decentralized digital financial innovation.
As a result, the circular prohibiting banks and financial institutions from dealing in the domain of decentralized digital finance was overturned by the Supreme Court of India.
Why Did Supreme Court of India Overturn RBIs Circular?
In case you are one of the crypto enthusiasts looking for a new crypto asset to invest in India, you must know about the reasons why the Supreme Court of India overturned RBIs circular. It was done for the following reasons:
- The court found it a blanket ban.
- It was disproportionate.
- Cryptocurrencies had not caused any damage to RBI regulated banks and financial institutions.
Therefore, it is now important for everyone searching for a new crypto asset to invest in to know about the way Indian Income Tax rules affect income from mining staking airdrops and forking.
This is what you will get to know about through a new post in this series.
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Income Tax Act of India About Earnings From Cryptocurrency – Part 3