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Bitcoin is a valuable digital virtual currency. It can be shared directly between two parties over the internet, eliminating the need for a middleman. It has also been dubbed the “money for the Internet.”
Bitcoin is a valuable digital virtual currency. It can be shared directly between two parties over the internet, eliminating the need for a middleman. It has also been dubbed the “money for the Internet.” It is easy to use and can be sent easily and safely from one location to another, removing territorial barriers and bringing the entire world together on a single platform.
The value of a Bitcoin is dictated by demand and supply, i.e. market forces, without any outside interference by any central authority due to its decentralised existence.
Latest updates – Clarification on proposed Section 115BBH in Budget 2022
1. Losses incurred from one virtual digital currency cannot be set-off against income from another digital currency.
2. Infrastructure cost incurred on mining crypto assets will not be treated as cost of acquisition.
Union Budget 2022 Outcome:
1. Income from transfer of virtual digital assets such as crypto, NFTs will be taxed at 30%.
2. No deduction, except the cost of acquisition, will be allowed while reporting income from transfer of digital assets.
3. Loss from digital assets cannot be set-off against any other income.
4. Gifting of digital assets will attract tax in the hands of receiver.Losses incurred from one virtual digital currency cannot be set-off against income from another digital currency.
How is Bitcoin Created?
Bitcoin is produced through a technique known as mining. This can be compared to gold mining, but unlike gold mining, mining allows the computer’s computing power to generate (mine) new Bitcoins.
Computers solve incredibly difficult mathematical problems, and the bitcoin is awarded to the machine that solves the problem first.
The market forces of demand and supply decide the value of a Bitcoin on the free market. The price of Bitcoin is influenced by global events as well as macroeconomic factors.
For example, the presidential election in the United States, or sanctions imposed on a nation, all of these factors impact the price of Bitcoin, just as they do on the price of any other asset class such as stocks.
Indian Budget 2018 and Bitcoin
The fall in the value of cryptocurrencies in general, and Bitcoin in particular, correlated with the correction in the Indian market following the budget, with the Sensex dropping more than 1,000 points in less than a week.
This sparked a lot of speculation and conjecture about the potential impact of the Indian budget on cryptocurrencies, particularly Bitcoin.
Mr Arun Jaitley explained all misunderstandings about bitcoin during his Budget speech on February 1, 2018, when he announced that the Indian government had decided not to accept bitcoin or any cryptocurrency legal tender.
He also said that while the Indian government does not consider Bitcoin illegal, it does consider it a high-risk investment.
According to the government, those who wish to invest in cryptocurrencies should do so after extensive research and understanding. It also promotes the use of other investment options, such as mutual funds, among others.
On the other hand, the government stated that it was working to adapt to evolving technology by implementing blockchain technology.
The key system that supports cryptocurrencies like Bitcoin is blockchain technology.
GST and Bitcoin
To add to the ambiguity around Bitcoin’s taxability, the government’s stance on whether it is a product or service subject to GST is also ambiguous.
Bitcoin will not be recognised as legal tender, according to the government. However, if it is a product or a service, it will decide if it is taxed at a lower rate of 12 per cent or a higher rate of 18 per cent.
Bitcoin purchases and sales are currently exempt from GST. Mr Arun Jaitley, the Finance Minister, said in his 2018 budget speech that the government is working to clarify the application of GST on the same.