Bitcoins have soared by more than 1,000 percent since the start of 2017. The surge was observed despite multiple warnings about the risks associated with the virtual currency.
The underlying technology, known as blockchain, is the foundation on which bitcoins are traded. The hallmark of this system is that they function based on a decentralised network with zero regulation.
Like any other currency, Bitcoin too fluctuates in value, relative to other currencies. Each time there is a change in ownership from seller to buyer, the two parties agree on a price.
How to Pay in Bitcoin?
Several digital wallets have sprung up in India to facilitate bitcoin transactions. Over the last few months, a number of bookshops, retail outlets and restaurants have started accepting bitcoins. So, the next time you enter a coffee shop, you might as well consider paying in bitcoin.
Though many experts are of the view that the bitcoin bubble will soon burst, the cryptocurrency is at the cusp of being an integral part of the global financial system.
The first step towards transacting in bitcoin, is to get yourself registered with a digital wallet. These wallets are available both on web and mobile applications. Signing up requires only a few basic details like name, email ID and mobile number, after which you need to link your bank account by submitting an identity proof and filling in the KYC details. The entire process of payment is a breeze.
All you need to do is convert the amount to be paid from INR to bitcoin and enter the unique wallet address given by the service provider.
Investors Close to the Bitcoin Iceberg
Bitcoin provides a hassle-free and anonymous system for transfer of funds outside of conventional payment systems. It is widely accepted as an attractive investment option. Simply put, people don’t like to spend appreciating assets.
Trading in bitcoin is similar to buying and selling shares. Trades are generally placed based on the last traded price.
In case of a buy, a bid is placed at the lowest possible price. The sell order gets directly pulled into the order book and as soon as it hits the desired price cap, the transaction is executed.
All transactions are recorded in the wallet’s trade history – which serves as a digital ledger of sorts.
Regulatory Framework for Bitcoin
When it comes to transacting in bitcoin, there are no well-defined regulations yet. The government is still working towards building a framework on digital currencies.
Recently, the Income Tax (IT) department conducted a survey encompassing major bitcoin exchanges in India – with the aim of gathering information about transactions and evaluating the risk of tax evasion.
Though the Reserve Bank of India (RBI) has advised caution, bitcoin trading is not legal in India yet. In the meanwhile, anyone who earns while trading in bitcoin needs to declare their income and pay taxes.
Since the Income Tax Act does not entail the provisions in this regard, there are four ways under which tax on income can be paid – capital gains, business income, professional income and income from other sources.
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