Cryptocurrencies: Not legal tender Cryptocurrency exchanges: Effectively illegal – regulations being considered
Cryptocurrencies are not legal tender in India, and while exchanges are legal, the government has made it very difficult for them to operate. Although there is currently a lack of clarity over the tax status of cryptocurrencies, the chairman of the Central Board of Direct Taxation has said that anyone making profits from Bitcoin will have to pay taxes on them. Other Income Tax Department sources have suggested that cryptocurrency profits should be taxed as capital gains.
Cryptocurrency exchange regulations in India have grown increasingly harsh. While technically legal, in April 2018 the Reserve Bank of India (RBI) banned banks and any regulated financial institutions from “dealing with or settling virtual currencies”. The sweeping regulation prohibited trade of cryptocurrencies on domestic exchanges – and gave existing exchanges until 6 July 2018 to wind down.
India’s government seems to be looking at the possibility of less prohibitive cryptocurrency regulations. In 2017, the Special Secretary of Economic Affairs formed a committee to suggest ways of dealing with the potential AML/CFT and consumer protection issues related to cryptocurrencies. In 2018, reports suggested that a government committee was drafting new legislation which introduced greater cryptocurrency protections for “the common man”.
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