Union Budget 2022 Update: Earnings from the exchange of electronic assets such as cryptocurrency will be taxed at 30%. There will be no Concessions and deductions allowed, save for the cost of purchasing digital assets. Losses on the selling of digital assets cannot be offset against the other earnings. Above the threshold, a 1% TDS will be imposed. Giving away digital assets will be taxed in the recipient’s hands as well. A CryptoCurrency is a decentralized digital property and means of exchange that is built on blockchain innovation.

What is Cryptocurrency?

Cryptocurrency is a type of virtual digital asset that is supposed to function as a medium of exchange by utilizing cryptography to safeguard transactions and control asset generation. It has emerged as one of the most promising new investment avenues.

Cryptography refers to the numerous algorithms and approaches used to protect these entries, such as elliptical curve encoding, public-private key combinations, and hashing processes. It is a set of binary data that is intended to be private and safe, in which information is turned into numbers.

These are decentralized in nature, which means they are neither owned nor controlled by a single organization. It does not depend on central banks and is intended to function as a medium of exchange through the use of its underlying blockchain tech.

The ledger, which is a repository of transactional data, is shared on a blockchain system. When a transfer is initiated, a new block with transaction information is generated and sent to all network users. It is a peer-to-peer payment network that enables anyone to send and receive money from anywhere in the world.

What are the Benefits of Cryptocurrencies?

• Decentralized solutions that do not fail at a single source of failure enable cheaper and faster transfers of currency.
• Third parties, such as banks and monetary institutions, are not involved.
• Cryptocurrency investments can yield massive gains, and their values have surged in the recent decade.
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What are the Disadvantages of Cryptocurrency?

• Price volatility, significant energy usage for mining operations, and use in criminal activities are all characteristics of cryptocurrencies.
• Leaves a digital trail that can be decrypted, enabling authorities to trace individuals’ financial activity.
• Transactions are vulnerable to hacking due to their digital character.

Cryptocurrency Validity:

Indian government has not awarded cryptocurrencies legal currency status. In 2018, the RBI sought to enforce a ban by limiting banking services to cryptocurrency exchanges. The restriction, however, was overturned by the Supreme Court on legal grounds, as online exchanges violate basic rights. The income tax administration has not yet provided any explanation on the tax consequences of crypto transaction profits.

India’s system for crypto taxation is still in need of improvement.

The 30% tax on bitcoin revenue has elicited a mixed response from Indians. Some argue that the 30% tax on cryptocurrencies shows that the government considers it to be on par with gambling and gambling. A petition to repeal the 30% tax received the initial objective of 50,000 signatories within hours of its launch.

Some are pleased that a framework for taxing cryptocurrencies has been established. However, for most people, a 30% tax was the lesser of two alternatives, the other being an absolute ban. Trading in cryptocurrency is lawful in India as long as it is not prohibited by law.

By definition, tax law cannot legalize actions or commodities. Even in the absence of regulatory certainty, tax laws remain. The perception that India has suggested a cryptocurrency tax and thereby legitimized it is hence erroneous.