Cryptocurrency and its Taxability in India

Taxation of Cryptocurrency in India

Cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Cryptocurrencies are decentralized networks based on blockchain technology. Cryptocurrency is not issued by any Central Authority, so there is no interference from the Government in their trading. A Cryptocurrency is a form of digital asset based on a network.

“Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions. Cryptocurrencies can be purchased from the Crypto exchange.

Taxation of Cryptocurrency in India

 

Types of Cryptocurrencies

There are many different types of Cryptocurrency, but these nine are among some of the more well-known currencies

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Tether (USDT)
  • Binance Coin (BNB)
  • Ripple (XRP)
  • Tera (LUNA)
  • Dogecoin (DOGE)
  • Shiba-inu (SHIB)
  • Litecoin (LTC)
  • Ethereum Classic (ETC)

 

How to Buy Cryptocurrency

Any investor can purchase Cryptocurrency from popular crypto exchanges such as Coinbase, apps such as Cash App, or through brokers.

 

Is Cryptocurrency Legal in India?

Taxing Cryptocurrencies does not give them legal status in the country, Finance Minister Nirmala Sitharaman clarified in the Parliament. It’s the country’s sovereign right to tax Cryptocurrency transactions.

 

Advantages of Taxation of Cryptocurrency in India

  • Cheaper and faster money transfers with decentralized systems.
  • No involvement of Third Party such as Banks.
  • Investment in Cryptocurrency generates huge profits.

 

Disadvantages of Taxation of Cryptocurrency in India

  • Cryptocurrency includes high price volatility that can lead to major loss to the investor
  • Leaves a digital trail that allows the authority to track financial transactions.
  • Because of digital nature transactions can be hacked.

 

Tax Implications on Virtual Digital Assets

Following section 115BBH shall be inserted by the Finance Act, 2022, w.e.f. 1-4-2023:

Tax on income from virtual digital assets:

(1) Where the total income of an assessee includes any income from the transfer of any virtual digital asset, notwithstanding anything contained in any other provision of this Act, the income tax payable shall be the aggregate of—

(a)  The amount of income tax calculated on the income from the transfer of such virtual digital asset at the rate of thirty percent; and

(b)  The amount of income tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a).

(2) Notwithstanding anything contained in any other provision of this Act,—

(a) No deduction in respect of any expenditure (other than the cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income referred to in clause (a) of sub-section (1); and

(b) No set off of loss from the transfer of the virtual digital asset computed under clause (a) of sub-section (1) shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years.

(3) For the purposes of this section, the word “transfer” as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not.

 

Key points about Virtual Digital Asset from Budget speech given by Finance Minister 

 

There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, the Finance Minister proposes that any income from the transfer of any virtual digital asset shall be taxed at the rate of 30 percent.

  • No deduction in respect of any expenditure or allowance shall be allowed while computing such income except the cost of acquisition. Further, loss from the transfer of virtual digital assets cannot be set off against any other income.
  • Further, in order to capture the transaction details, the Finance Minister proposes to provide for TDS on payment made in relation to the transfer of virtual digital assets at the rate of 1 percent of such consideration above a monetary threshold.

 

Points to Remember

  • TDS needs to be deducted under section 194S by the person paying for the Transfer of Cryptocurrency if the consideration paid during the FY does not exceed Rs 50,000 (in case of a specified person) or Rs 10,000 (in any case other than a specified person). Provisions of Section 203A (Tax Deduction and Collection number) and 206AB (higher TDS rates for non–filters of ITR) will not be applicable to payments made by specified persons.
  • Assesses is not allowed any basic exemption limit in case the only income during the year is from the transfer of digital assets.
  • Meaning of Specified Person: For the purposes of this section “specified person” means a person,—
(a)   being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
(b)   being an individual or a Hindu undivided family, not having any income under the head “Profits and gains of business or profession”.’.

 

Key Takeaways

Cryptocurrency is a digital virtual asset which is very popular nowadays. Cryptocurrency has its own advantages and disadvantages. Before investing in a cryptocurrency, be sure you understand how it works, where it can be used, how to exchange it and how it is taxed in India. In some cases, rules made under FEMA by RBI are also involved due to involvement in Foreign Currency in the transaction of sale and purchase of Cryptocurrency. Use a trustworthy wallet. It is going to take some research on your part to choose the right wallet for your needs. Have a backup strategy. Think about what happens if your computer or mobile device (or wherever you store your wallet) is lost or stolen. People should do all the research before investing. And should be aware of all risks that arise from trading in Cryptocurrency.

 

For more information and updates, you can contact CA Rajeev Gupta or visit our website www.sigmac.co.in

 

About the Author: This article is contributed by CA Rajeev Gupta, Partner – SIGMAC & Co, Chartered Accountants, Location- Delhi NCR and Gurgaon.

In case of any query please feel free to contact us at: rajeev@sigmac.co.in

 

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Disclaimer: This content has been prepared for general guidance of the reader on the matters of interest only. It should not be treated as professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information or provisions of the law contained in this article.

Author and/ or SIGMAC & Co., Chartered Accountants, its members, employees and agents accept no liability, and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.

7 Corporate Legal Advisory Services: A Simple Definition

Corporate Legal Advisory Services

 

Corporate Legal Advisory Services

 

7 Corporate Legal Advisory Services:

We offer a comprehensive range of corporate legal consultancy services in India, which reflects our knowledge and experience in a variety of legal practice areas. Whatever service you choose, you may remain compliant and competitive. Among the primary areas of specialization are,

  1. Mergers and Acquisitions: Creating synergy Mergers and acquisitions (M&A) are commonly used to produce synergies that result in the merged firm being worth more than the two companies independently.

  2. Contractual Law: Contract law is the corpus of law that governs, enforces, and analyses agreements involving the exchange of products, services, real estate, or money. An agreement established between two or more people or business entities that promise to perform something in exchange for a gain or advantage is legally binding, according to contract law.

  3. Corporate and Commercial Law: Corporate law oversees the establishment of corporations, shareholder rights, mergers, and acquisitions, whereas business law or commercial law governs the selling and distribution of goods.
  1. Insolvency Law and Restructuring: Because insolvency and restructuring involve mounds of documentation, lawyers must be organized and able to prioritize their task, especially when dealing with many assignments. With so much at risk, attention to detail is critical when drafting asset sale agreements or court paperwork.
  1. Concessions and Public Procurement: The Public Procurement and Concessions Commission (PPCC) has launched a number of public awareness efforts to measure public opinion on the effects of Liberia’s public procurement implementation program.
  1. Antitrust and Competition Law: Antitrust and competition laws strive to prevent anti-competitive practices from undermining the benefits of a competitive market. According to the Company’s Antitrust Policy, every director, officer, and employee is responsible for adhering to all applicable antitrust and competition laws.
     
  2. Real Estate and Construction: Antitrust and competition laws strive to prevent anti-competitive practices from undermining the benefits of a competitive market. According to the Company’s Antitrust Policy, every director, officer, and employee is responsible for adhering to all applicable antitrust and competition laws.

In India, we offer a wide range of business legal advising services. We take great satisfaction in declaring that we rely on the most trusted Corporate Insolvency Process in India to provide complete peace of mind to our clients. We have carved a place in the business by having years of experience working with enterprises suffering from financial failure and insolvency. So, if your company is unable to satisfy its pending financial obligations to its lender, we can assist you by modifying the loan repayment schedule.

 

For more information and updates, you can contact CA Rajeev Gupta or visit our website www.sigmac.co.in

 

About the Author: This article is contributed by CA Rajeev Gupta, Partner – SIGMAC & Co, Chartered Accountants, Location- Delhi NCR and Gurgaon.

In case of any query please feel free to contact us at: rajeev@sigmac.co.in

 

Follow us on :

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Disclaimer: This content has been prepared for the general guidance of the reader on matters of interest only. It should not be treated as professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information or provisions of the law contained in this article. Author and/ or SIGMAC & Co., Chartered Accountants, its members, employees and agents accept no liability and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.

Audit And Assurance Company On A Budget: 8 Tips From The Great Depression

Audit and Assurance Services

Audit and Assurance Services

Audits are divided into three stages: preparation, fieldwork, and reporting. Each phase can also be subdivided further. There are eight major steps in the preparation phase:

Audit and Assurance Services

 

  • Receipt of Assignment: This phase informs your auditor if they must do a financial statement audit or a more comprehensive performance or compliance audit. They may be given a vague assignment, to begin with, but as auditing experts, they will be able to swiftly identify the job’s relevant objectives.

  • Research the Audit Subject: The AICPA issues Auditing Standards Statements (SAS). These publications provide external auditors with guidance. The US GAO also publishes the Yellow Book, which contains auditing requirements for federal entities. Both sorts of publications specify the questions auditors should ask their respondents before conducting risk assessments. Understanding the industry, the legislation, the nature of the company, the entity’s objectives and plans, the technique the entity uses to assess and review financial performance, and the entity’s internal controls are among these. To save time during this phase, many auditors adhere to the same last year’s (SALY) philosophy. This indicates that they do the audit in the same method as the prior year. Many auditors, however, disagree with this technique because they believe it is lazy.

  • Determine Audit Criteria: This is the auditor’s standard. Auditors conduct financial audits and compare them to the Financial Accounting Standards Board’s Generally Accepted Auditing Standards (GAAS) (FASB). Before the audit, the client and auditor must agree on the benchmark for audits that go beyond finances.

  • Perform the Risk Assessment: A risk assessment consists of two parts: segmenting the audit and measuring the risk of each segment. Financial statement audits are already segmented by SASs. When it comes to other sorts of audits, auditors may have to get creative to separate the risk groups. The auditor then applies an audit risk calculation to each piece: (Detection Risk) x (Inherent Risk) x (Audit Risk) (Control Risk). This formula calculates the probability of incorrect findings as well as undetected major misstatements. The auditor has complete control over the detection risk in this calculation.

  • Confirm Audit Objectives: The auditor has already analyzed the risks and can confirm what the audit objective(s) are at this point. In the case of a financial audit, for example, the auditor can include specific objectives (sub-objectives) such as a review of cash receipts.

  • Choose Audit Method: The techniques for making decisive findings should come naturally from the audit goals. The auditor will link each aim to a methodology such that their results are supported by good evidence. Methodologies include sampling, observations, interviews, and fluctuation analysis, to name a few.

  • Link the Method to Cost: Once the auditor has determined the methodologies, the auditor will budget the cost so that the firm may estimate the total cost of the audit.

  • Confirm the Audit Plan: Your auditor’s final step before going on the field is to finalize their plan with your company. The on-site process can begin once your company has confirmed the plan and is satisfied with the number of hours that correspond to the methodology and expenses.

 

For more information and updates, you can contact CA Rajeev Gupta or visit our website www.sigmac.co.in

 

About the Author: This article is contributed by CA Rajeev Gupta, Partner – SIGMAC & Co, Chartered Accountants, Location- Delhi NCR and Gurgaon.

In case of any query please feel free to contact us at: rajeev@sigmac.co.in

 

Follow us on :

facebook icon 512x512 1Chartered Accountant Firm in Gurugramsocial media twitter logo blue isolated free vectorSigmac Linkedin

 

Disclaimer: This content has been prepared for the general guidance of the reader on matters of interest only. It should not be treated as professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information or provisions of the law contained in this article. Author and/ or SIGMAC & Co., Chartered Accountants, its members, employees and agents accept no liability and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.