In the latest move in India’s regulatory clampdown on cryptocurrencies, the Registrar of Companies (ROC) has stopped registering cryptocurrency exchanges, Business Standard reports. The ROC is also refusing to register companies with ‘Bitcoin’ in their names and the Ministry of Corporate Affairs is asking for an undertaking from IT and software companies that they will not deal with cryptocurrencies. This comes hot on the heels of several major Indian banks suspending the accounts of bitcoin exchanges as we write here.
Previous statements from the finance ministry and the RBI have said the investors are trading in cryptocurrencies at their own risk. However virtual currencies have not been explicitly declared illegal.
Capital Gains Tax – How much?
In December 2017, the Income Tax Department conducted surveys on several cryptocurrency exchanges in India and sent notices to 4-5 lakh investors asking about the sources of their investments and the tax paid on their gains in virtual currencies. According to Income Tax sources quoted by the Business Standard, capital gains tax will be payable on gains in the currency including advance tax. This will be 20% for long-term gains and at the applicable slab rate for short-term gains.
However, if the income from bitcoin is more in the nature of trading than investing, it is likely to be treated as income from business and profession.
GST or no GST?
Some bitcoin exchanges have also approached the Authority for Advance Rulings to determine the applicability of GST on bitcoin. Business Standard reports that a similar application by bitcoin exchange Zebpay to the Directorate General of Foreign Trade was returned with a direction to refer the question to the Department of Financial Services. No clarity has yet emerged on the matter. Some exchanges such as Coinsecure, charge 18% GST on their transaction fees.
There is a lack of clarity on taxation and also the regulatory front. This is a developing story and the confusion is likely to reign supreme till the government comes up with a concrete policy on cryptocurrency.