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cryptocurrencies: Investing in cryptocurrencies? Know the tax implications

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The successive lockdowns have made people aware of the importance of a passive source of income, and in search of it, Indians have tried different things to make good money. Some have started their own businesses from home and others have started investing in IPOs and real estate. However, many people choose to invest in cryptocurrencies. According to a report, over ten million crypto investors joined India in 2021.

It seems that hesitation about cryptoculture in India is steadily declining. People find great opportunities with great ROI. However, despite the huge growth in the number of cryptocurrency traders and investors, people are concerned about taxation and the future of the asset in India. Let’s talk about the tax implications for cryptocurrency in India. We would like to point out that all information is for knowledge purposes only.

Taxation of cryptocurrencies

The Reserve (RBI) has not yet granted legal tender status to Bitcoin or any other cryptocurrency in India. Therefore, there are no clear rules or guidelines that define the taxation of cryptocurrencies, which requires specific clarification from the Income Tax (IT) department.

However, skipping taxes on profits from the sale of cryptocurrencies is not a good idea. All income, with the exception of the expressly exempted income, is subject to income tax. This means that investors are taxable on cryptocurrency investments.

Type of investment

In common income tax usage, the taxation of cryptocurrencies should depend on the type of investment – whether it is held in the form of currency or in the form of assets.

Profits from the sale of cryptocurrencies can be taxed as business income if traded frequently, or as capital gains if held for investment purposes. It should be noted, however, that if the profit counts as operating income, it can be taxed according to the applicable plate rate; however, if it is held for investment purposes, taxation can be equated with tax gains in the form of capital gains.

This also means that if taxpayers have used their investments within three years, there will be short-term capital gains according to the relevant tax tables. However, if the repayment is made after 3 years it can be treated as a long term capital gain and taxed at 20% with indexation.

Meanwhile, some experts believe that profits from cryptocurrencies can be treated as income from other sources. We can also view profits from frequent trading as income from speculative business income. However, more details and discussion are needed to better understand it.

What about mining?
Mining-generated cryptocurrency is a self-generated capital value and can be taxed as capital gain, but Section 55 of the IT Act 1961, which deals with acquisition and improvement costs, does not recognize it.

However, according to some online sources, cryptocurrency mining can be considered a taxable event. The coin’s fair market value or cost base is the price at the time the miner mined it.

It should be noted that there is a business allowance for the equipment and resources used in mining. The nature of these deductions will depend on whether you mined the cryptocurrency for personal use. If you run a mining business, you can get deductions to help lower your tax bill. However, you cannot claim these deductions if you have mined cryptocurrencies for personal gain.

Disclosure of income from cryptocurrencies
It is common knowledge that taxpayers with an annual income of more than £ 50 lakh are required to declare their assets and liabilities, along with their cost of purchase, in the statement of assets and liabilities. Since cryptocurrencies can also be considered assets, taxpayers must also include cryptocurrencies in the table above.

In addition, resident taxpayers and ordinary residents must also disclose foreign income and assets on their tax returns or tax returns.

If we also consider the tax and criminal consequences of the law and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015, it can be a good step for taxpayers to disclose cryptocurrency holdings in the foreign assets or the income statement.

Regarding the taxation of cryptocurrency in India, there are so far no official announcements or guidelines regarding the introduction of cryptocurrency and its tax burden. Hence, we will have to wait for government guidelines to find out more details on cryptocurrency taxation.

(The author, Amit Gupta, is the managing director of SAG Infotech. The views are his own)

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Cryptocurrency

Bitcoin trial: Defendant wins dispute over $50B in Bitcoin

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Craig Wright, a computer scientist who claims to be the inventor of Bitcoin, asserted himself on Monday in a civil lawsuit against the family of a deceased business partner alleging that they owed half of tens of billions in cryptocurrency assets

December 6, 2021, 6:28 pm

3 minutes read

A Florida jury found that Wright did not owe David Kleiman’s family half of the 1.1 million bitcoin. The jury has awarded a joint venture between the two men $ 100 million in intellectual property, a fraction of what Kleiman’s attorneys asked for in court.

“This was a great win for our side,” said Andres Rivero of Rivero Mestre LLP, Wright’s senior attorney.

The case was very technical, with the jury listening to explanations about the intricacies of how cryptocurrencies work, as well as the opaque origins of Bitcoin’s creation. It took the jury a whole week to deliberate and repeatedly asked the lawyers on both sides and the judge questions about how cryptocurrencies work and the business relationship between the two men.

At the center of the process is 1.1 million bitcoins, valued at around $ 50 billion, based on Monday’s prices. These were among the first bitcoins to be created through mining and could only be owned by a person or organization who had something to do with digital currency from the start.

Bitcoin’s origins have always been a mystery, which is why this process has received so much attention from outsiders. In October 2008, at the height of the financial crisis, a person named “Satoshi Nakamoto” published a paper setting out a framework for a digital currency that was not tied to any legal or sovereign authority. The currency degradation began a few months later.

The name Nakamoto, roughly translated from Japanese “in the center of”, has never been considered the real name of the creator of Bitcoin. Some in the cryptocurrency community don’t even believe that Nakamoto was a single person.

Wright has been claiming he was Nakamoto since 2016, a claim that was received with skepticism by a sizable section of the cryptocurrency community. Because of its structure, all Bitcoin transactions are public and the 1.1 million Bitcoins in question have remained intact since Wright’s great revelation. Members of the Bitcoin community have regularly asked Wright to transfer just a fraction of the coins to a separate account in order to register that he is really as rich as he claims.

During the trial, both Wright and other cryptocurrency experts testified under oath that Wright owned the bitcoins in question. Wright said he would prove his property if he were to win the trial.

David Kleiman died in April 2013. His family, led by his brother Ira Kleiman, claimed that David Kleiman and Wright were close friends and co-founded Bitcoin through a partnership. Kleiman’s estate sued half of the bitcoins in question, as well as intellectual property rights.

Wright’s attorneys have repeatedly said that David Kleiman and Wright were friends and worked together to work together, but their partnership had nothing to do with the creation or early operation of Bitcoin.

Wright has announced that a large part of the Bitcoin fortune will be donated to charity should he win in the process. In an interview, Wright’s attorney Rivero confirmed Wright’s plans to donate much of his Bitcoin fortune.

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5 Reasons Why Cryptocurrency Regulation Is Important

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There is a need to regulate cryptocurrency taking into account the interests of investors

The Indian government plans to propose a bill during the current winter session of Parliament to classify cryptocurrencies as financial assets while protecting the interests of retail investors. In all likelihood, the bill can set a minimum amount for investments in cryptocurrencies while prohibiting their use as legal tender or currency substitute. The bill also proposes laying the groundwork for the creation of the official digital currency to be issued by the Reserve Bank of India (RBI) and regulated under the RBI law, according to a report by NDTV.

From an investor’s perspective, cryptocurrency regulation is pretty important. With the right regulations, the government can make the cryptocurrency market a safer environment for investors.

Here are 5 reasons why cryptocurrencies need to be regulated:

1) Prevent market manipulation and protect investors: Market manipulation and price volatility are common with cryptocurrencies. Take Bitcoin, for example, the world’s oldest and most popular cryptocurrency, which has soared to an all-time high since early 2021 before collapsing and losing much of its value. The lack of authorized information about these digital assets and the associated technological complexity therefore make it imperative to enact regulations to protect investors.

2) Allow selected cryptocurrencies: Thousands of cryptocurrencies exist around the world. Most investors, however, only know a few of them, such as Bitcoin, Ether, Ripple and Dogecoin, among others. They have little knowledge of the thousands of other virtual assets. To protect customers, a regulatory authority is required that releases cryptocurrencies that can disclose all information about the performance of digital assets, their risks and potential.

3) Understand the risks associated with technology: Technology is advancing at breakneck speed. This carries a significant risk as such changes have the potential to make technologies, including blockchain, obsolete in the future. Given the rapid pace of technological change, an information infrastructure and professional financial advisors with knowledge of cryptocurrency are required. This allows investors to understand the technological risks of cryptocurrencies and make informed decisions.

4) Online Fraud and Cyber ​​Security Risks: Investing in cryptocurrencies carries another risk – online fraud. Hacking is a major threat worldwide and cyberattacks are widespread. A cyber attack could result in losses for investors who have invested their savings in cryptocurrencies. Regulations allow authorities to take steps to help cryptocurrency investors protect their assets. In addition, investors can address concerns or reclaim their investments if they lose them.

5) money laundering: Any unregulated system can finance criminal activity. As a result, a customer due diligence process similar to that of a bank is required. This can help track the true identities of investors and verify their locations as they buy or sell cryptocurrencies. Any violation of such norms should be punished with severe sanctions.

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FBI Seizes Cryptocurrency Worth $2.3 Million From REvil Ransomware Group Affiliate

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US law enforcement agencies seized 39.9 bitcoins from an Exodus wallet valued at about $ 2.3 million (about Rs.17.3 billion) from a Russian citizen suspected of being involved with the infamous hacking group REvil that is known for its ransomware attacks. The Federal Bureau of Investigation (FBI) reported in an unsealed complaint last week that the wallet contained REvil ransom payments from a subsidiary identified as Aleksandr Sikerin that was found to be using ransomware viruses to break into US infrastructure databases.

The complaint, first seen by Bleeping Computer, shows that Sikerin – who is affiliated with REvil – was responsible for the ransomware attacks that resulted in payments of approximately $ 200 million between April 2019 and June 2021. 1,504.76 billion rupees) generated by victims. The cryptocurrency wallet, now under the control of the FBI, is “traceable to ransomware attacks by Sikerin”

Sikerin, whose last known address was traced back to the Russian city of Saint Petersburg, has meanwhile been charged with conspiracy and money laundering on several counts. However, law enforcement officials believe Sikerin is just one member of the REvil gang’s vast network.

Ransomware gang members are responsible for frontline hacking attacks and the theft of data from victims’ computers. They usually make 70-80 percent of the ransom.

REvil, also known as Sodinokibi or Sodin, has been one of the most notorious ransomware groups in recent years. The group targets corporate networks with spam, exploits, exposed remote desktop services and hacked managed service providers (MSPs).

While the FBI did not include the threat actor’s online alias in its complaint, Bleeping Computer staff verified the email address mentioned therein and determined that the name “engfog” was linked to a REvil subsidiary called “Lalartu” communicates. aka Aleksandr Sikerin – who was named in the complaint.

The news came almost a month after the U.S. Department of Justice charged a Ukrainian national and a Russian with one of the worst ransomware attacks on American targets, according to court records.

An indictment accused Ukrainian Jaroslaw Vasinskyj, who was arrested in Poland last month, of breaking into Florida software provider Kaseya on July 4th. From there, he and his accomplices simultaneously distributed the REvil ransomware to up to 1,500 Kaseya customers, encrypted their data and forced some to shut down for days.

Vasinskyi is accused of breaking into the victim companies and installing encryption software developed by the core group REvil. REvil handled the ransom negotiations directly and shared the profits with affiliates like Vasinskyi.

REvil, which was also involved in an attack on the world’s leading meat packer JBS SA, was intercepted in a joint operation that saw authorities reclaim $ 6 million in ransom payments.

Interested in cryptocurrency? We discuss everything about crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music, and anywhere you get your podcasts.

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