First of all, the Ministry of Corporate Affairs (MCA) has asked all companies in the country to compulsorily disclose any deal in cryptocurrencies or virtual currency on their balance sheets. This is an important step towards the regulation of crypto assets in India and is expected to bring a lot of transparency in the reporting or presentation of crypto investments.
Companies must disclose the profits or losses on transactions involving cryptocurrencies or virtual currency, the amount of the holding and the details of the deposits or advances of any person for the purpose of trading or investing in cryptocurrencies or virtual currency, in accordance with the latest amendments to Schedule III of the 2013 Companies Act. This will apply from the next financial year, the MCA said in a notice Wednesday.
“From regulation to outright prohibition, there are many competing theories about what the actual legislation will be. Given that narrative, the fact that the government has asked for disclosures, perhaps it seeks to regulate rather than ban cryptocurrencies. But these are still the early days and the most important piece of regulation is yet to come, “said GV Anand Bhushan, partner at Shardul Amarchand Mangaldas.
It is estimated that there are around 10 million individual crypto investors in India, but the number of companies that are exposed to this avenue is unknown.
“The government move is expected to boost institutional adoption of crypto assets. We are eagerly awaiting positive regulatory guidance from the Ministry of Finance and the Reserve Bank of India for more clarity on the regulation of cryptocurrencies in India. Indians have already invested around $ 1.5 billion in crypto assets, which clearly shows their intention to adopt digital assets, “said Shivam Thakral, CEO of BuyUcoin, a cryptocurrency exchange.
Globally, major companies like Tesla and MicroStrategy have kept large amounts of bitcoins on their balance sheets.
Even though the MCA makes it official for companies to hold and report crypto assets on their books, experts believe that there is still a disparity in how these assets will be taxed.
“Whether it is going to be taxed as business income, capital gains or speculative income, has yet to be proven. But it is certain that this information will be extracted by the tax authorities to verify whether people have paid taxes on this particular income or not, “said Pallav Narang, partner at CNK RK & Co. Chartered Accountants.” The government’s intention appears to be to include and regulate cryptocurrencies, “he added.
Meanwhile, the government is in the process of presenting a bill on cryptocurrencies. The contents of the bill are not yet known, but the Center said in February that the bill would seek to ban all private cryptocurrencies such as bitcoin and ether. However, it had recently hinted that it would take a calibrated approach towards digital assets.
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