Bitcoin is not legal tender in India: finance ministry
The Ministry of Finance clarified that virtual currencies are not backed by government fiat
Last week the Ministry of Finance said that virtual currencies (VCs), including bitcoins, are not currencies. “VCs are not currencies. These are also being described as ‘coins’. There is however no physical attribute to these coins. Therefore, VCs are neither currencies nor coins,” the ministry said in a press statement. It further clarified that virtual currencies are not backed by government fiat. “These are also not legal tender. The government or Reserve Bank of India (RBI) has not authorized any VCs as a medium of exchange.” With this statement, there is finally some clarity on how India plans to treat bitcoin. So far, it was not clear if bitcoin would come under the purview of Reserve Bank of India.
Why not a currency
Bitcoin exchanges are not surprised by this move. “For the government to give virtual currency a currency status has a bigger implication, especially due to the capital controls we have here in India. If they give it a status of currency, they have to allow us to run the exchanges here. If they allow the exchanges, how are they going to control the flow of money in and out of the country? I was expecting this to happen,” said Praveen Kumar, chairman and chief executive officer of Belfrics Global SDH, a company that runs bitcoin exchanges in Singapore, Malaysia, Bahrain, Japan, Kenya, Nigeria, Tanzania and India. Why has the government clarified about coins? “Several initial coin offerings are coming up in the country. Some term it as currency or coins. From a layman perspective, they can assume that it is something similar to what central banks issue as coins. It is a clarification that the government is not regulating the virtual currencies and coins,” added Kumar.
What it means for you
Last year, a few countries accepted bitcoin as a legal payment system. For instance, from 1 April 2017, bitcoin has become a legal payment system in Japan. Meanwhile, Singapore-based startup TenX last year allowed conversion of bitcoins on Visa cards to make payments. You are unlikely to see such kind of changes in payments in our daily transactions in India post the recent announcement.
Meanwhile, the income-tax department is keeping a watch and hence if you have gained any profits from bitcoins, you will have to pay capital gains tax on it.
Currently, income-tax department, enforcement department, the Securities and Exchange Board of India and Ministry of Finance are tracking virtual currencies. You can expect further developments in the virtual currencies space in the coming weeks.