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6 Laws Which Every Indian Investor Must Know

07 Oct 2022 By : Harshil Shah
Southeast Asia’s Lar

Key Takeaways

  • Apart from the 30% taxation on virtual digital assets, 1% of TDS has also been introduced by the government

  • Crimes such as extortion, bribery, cheating, fraud, and theft are punishable under the IPC acts and do not exempt the criminal because he was using virtual digital assets for committing the crime

  • Thefts, money laundering, hacking, spying, fraud, and cheating are some of the crimes that are included in the IT act and punishable accordingly 

As we are heading towards better metrics on digital inclusion, the role of virtual digital assets is taking the central stage. Apart from being an efficient mode of value transfer, cryptocurrencies are also challenging the hegemony of traditional markets in the investment space. With time, we have witnessed a surge in the market capitalization of Indian crypto investments, creating substantially better returns from national stock exchanges. The higher returns and more accessible options make crypto a lucrative investment pool for Indian investors.

In light of these situations, we at CoinGabbar are evaluating Indian laws that affect or can potentially affect any crypto investor in India. As an active crypto investor, you must be aware of the following statutes and ensure better safety and compliance of your crypto portfolio. 

6 Laws You Must Know As Indian Crypto Investors

These are some of the most important laws in India that can impact crypto investors in the long run. CoinGabbar is also providing you with the relevant that you can refer to know more about the legal status of crypto in India. 

Income-tax Act

The income tax act 2022 of India became the foundation of crypto taxes in India and legalized the movement of crypto investments. Even though the government did not address the legal status of cryptocurrencies directly, it has legitimized the trade of virtual digital assets by asserting a 30% tax on any such transaction. 

Apart from the 30% taxation on VDA, 1% of TDS (Tax Deducted at Source) has also been introduced. The raging surge of crypto investments from India made it mandatory for the Indian government to control and pushing heavy taxes into the game was the only solution they could come up with. Heavy taxes on DeFi transactions are acting as a shadow ban for Indian crypto traders but it does not impact those who are in the game for the long run. 

Black Money and Imposition of Tax Act

Any undisclosed foreign income or asset which is used for conducting buy or sell transactions in the virtual digital assets can cause big trouble for you. Using black money to transact on foreign exchanges can get you charged with black money and imposition of the tax act. It is a serious offense in India and one could face rigorous imprisonment of 10 years or more in case of conviction. 

However, if you are trading in cryptocurrencies with legal gains and avoiding tax evasion, it should not worry you even in the slightest. 

Prohibition of Benami Property Transactions Act

If you are planning to avoid taxes on cryptocurrencies by trading through different identities, beware! Under the Prohibition of Benami Property Transactions Act India, you cannot trade in cryptocurrency with fake identities and not disclose all of your gains to a single entity while being so. This is taken up as deception by income tax authorities and could land you up in jail for 7 years or more if found guilty. 

Indian Penal Code

Indian Penal Code is the official criminal code of India which accounts for the conviction of different crimes. Indian Penal Code mentions the offenses of multiple financial crimes that are also bound for all crypto transactions as well. Crimes such as extortion, bribery, cheating, fraud, and theft are punishable under the IPC acts and do not exempt the criminal because it was using virtual digital assets to commit the crime. 

This should be the basic understanding to not get involved in anything which is not legal in India using VDA. All the transactions happening through exchanges are not anonymous and all the crimes can be traced back.

Information Technology Act

The Information Technology Act of India holds people responsible for committing crimes using technology. The IT act of India empowers the authorities to monitor and collect traffic, data, or information through any digital resource for the cyber security of the country. This act regulates the activities of intermediates in digital transactions and secures citizens from all sorts of cyber frauds.

All crypto-related crimes are also held under the IT act of India and can be punishable with imprisonment and fines. Thefts, money laundering, hacking, spying, fraud, and cheating are some of the crimes that are included in the IT act.

Prevention of Money Laundering Act

One of the major challenges that regulating authorities from all over the world have to face is a spike in money laundering using decentralized finance. Converting black money to white without leaving traces behind was never as easy as it is with cryptocurrencies. 

According to the Prevention of Money Laundering Act of India converting using cryptocurrencies or any other VDA including NFTs to convert black money to white can land you in jail for up to 7 years.

Conclusion

Cryptocurrencies are the unavoidable future of finance and India has to participate in the change while managing the above challenges. The road to a more digitally inclusive nation goes from empowering the people to the end of the chain. However, it would be not possible if news regarding crypto crimes and ineffective measures to control them will keep floating around. 

Being a part of one of the biggest crypto communities in the world, we would have to become more aware of the laws relating the cyber crimes and crypto misuses. Understanding the boundaries and making efforts to maintain them will create a new standard and open the gates of trust and mass adoption of cryptocurrencies in India.  

We hope that this article has provided you with a sufficient understanding of the Indian take on cryptocurrencies. To read more such interesting crypto-related blogs and the latest news, subscribe to the CoinGabbar newsletter by clicking here. 



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