Alok Puranik
The essence of the detailed decision given by the Supreme Court on virtual currency (crypto currency) in March 2020 was that the government should decide whether its business is legal or illegal in India. But the government is yet to decide this. Even after two years, the status of the legal status of this virtual currency is that the only thing that has been decided so far is that it should be taxed at the rate of thirty percent.
After the budget for the financial year 2022-23, the question has arisen whether the confusion regarding virtual currency (crypto currency) has been cleared or increased in the budget. It has been broadly stated in the budget that the income from the transaction of this virtual currency will be taxed at 30 percent. After this announcement, some investors have been convinced that now it is going to be completely legal. Investors are increasing in virtual currency, such news also came after the budget. But the actual situation is quite different.
Virtual currency is no longer a real currency. Having money means having the compulsion to accept it, that is, the person to whom it is given is legally bound to accept it. In India, if someone gives five hundred rupees to someone, he cannot refuse to accept it. This is a legal obligation and this is what makes the Indian Rupee a legal currency. But there is currently no such compulsion for virtual currency like crypto currency. The word ‘currency’ has been associated with crypto currency, like ‘sugar’ with brown sugar. But brown sugar cannot be given the status of sugar. The same is true of virtual currency that it has ‘currency’ in its name, the rest of the real currency has nothing to do with it.
Income from transactions of this virtual currency has been made taxable. At the moment the government wants to say what is ‘crypto currency’, we do not know. We can’t even decide right now. But it is in our interest to bring the income arising out of its transactions in the tax net, so we are making it taxable and this tax is levied at the rate of 30 per cent.
The highest rate of income tax is thirty percent, at the same rate income from this virtual currency will be taxed. Of course this is the highest rate of income tax. But the question is whether it is appropriate to tax virtual currency at the highest rate or not. The justification for levying taxes is decided on certain grounds. But there are many questions regarding virtual currency like- is investment in it a productive activity, does it increase productivity in the economy, does it provide capital to new ventures, does it provide quality employment at large…etc.
Virtual currency does not generate new capital for an enterprise. One of the contributions of the stock markets is that new business gets capital. Old businesses get capital for expansion. The issuance of new shares helps new businesses to raise capital. Whereas no such new capital gets to any business from the virtual currency market. That is, virtual currency has no contribution in creating new capital.
Virtual currency is basically a gambling type of transaction, which has no solid and legal basis. Share prices go up, go down, because the income assets associated with their companies fluctuate. But there is no such factor associated with virtual currency. What is crypto currency i.e. virtual currency, in fact it is also not clear. Behind the stock is a company, be it good or bad. But no one clearly knows who is behind the virtual currency. This is a big illusion. Betting runs on many baseless things. Like in IPL matches, betting is done on the fact that when such a player comes in the field, then his right foot will come first or his left foot will come. In this, millions of people become separate. But it cannot be said that all this is part of the game.
If virtual currency is not increasing productivity in the economy, then imposing a tax of thirty percent on it cannot be justified. The government can give concession in taxes to those industries that are generating employment on a large scale. But the business of virtual currency cannot be considered as such an enterprise. For technical reasons, sometimes gambling can also be considered an enterprise. It is estimated that Indians have invested about six and a half lakh crores in this virtual currency. No one has a logical answer as to why there will be consistent income in this.
So it is nothing more than gambling. Some people have earned in gambling, just because gambling cannot be declared an essential activity for the nation! The essence of the detailed decision given by the Supreme Court on virtual currency (crypto currency) in March 2020 was whether its business is legal or illegal in India, it should be decided by the government. But the government is yet to decide this.
Even after two years, the status of the legal status of this virtual currency is that the only thing that has been decided so far is that it should be taxed at the rate of thirty percent. When the government can show promptness in tax collection, then there should be similar promptness in the formulation of rules. Many people have invested huge amount in such virtual currency, whose definition even the government does not know. Right now the definition of this virtual currency is being worked on. This is a ridiculous situation.
Now the broad presumption is that virtual currency will not be declared outright illegal. Tax collection will be done at the highest level. So now the question will arise that is it safe for common investor and small investor to invest in it? The answer to the question that is given with regard to investing in stocks is that the risk is high. It is important to act with a sense of risk. After regular intervals from the stock exchanges also comes a bitter cry that hi, the money has sunk. The small investor is dead. If the small investor becomes greedy, he is sure to die.
Common investor is not only greedy but also ignorant. People also drown in the stock market, then tell that they were told that the amount invested doubles in two months. Logic does not tell them that if somewhere in two months the amount can be doubled, it can also become zero in two months. If greed and ignorance mix, then there are very fatal consequences. When the stock market continues to go up, the younger investors enter the market at a faster rate, then the previously knowledgeable investors are exiting the market. The wise type of greedy investors are big investors, they run away when they see the danger. Most small and ignorant investors drown in the stock market, who do not even know the ABCD of investment.
Investing in virtual currency at the moment is no more than investing in gambling. The government should make all the rules related to this as soon as possible. Even after two years of the Supreme Court’s decision, if there is no clarity on this issue, then it is clear that there is either confusion or laxity in the policy stance of the government or both.
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