The government has notified the companies to disclose their investments in virtual currency or Cryptocurrency in their balance sheets. This move is believed to be a major step in regulating the ongoing cryptocurrency trade in India.
Disclosing crypto assets in the financial position statement may help the government to access the information about the scale of virtual currency ownership, and also brings transparency in reporting and fillings.
The disclosure is compulsory in the Profit and Loss Account as well just like the Employee Stock option, and utilization of borrowed funds and share premium.
In the recent notification published by the Ministry of Corporate Affairs (MCA), as per the latest amendments to the Schedule III of the Companies Act, 2013, the companies have to mention their trades and investment in Cryptocurrency or Virtual Currency during the financial year in their books.
They are obliged to disclose-
(a) profit or loss on transactions involving Cryptocurrency or Virtual Currency
(b) amount of currency held as at the reporting date
(c) deposits or advances from any person for the purpose of trading or investing in Cryptocurrency or virtual currency.
As per IAMAI (Internet & Mobile Association of India), in the crypto community, over 10 million crypto holders are having crypto assets worth over USD 1 billion. Over 300 startups generate tens of thousands of jobs and hundreds of millions of dollars in revenue and taxes.
As per the statement to the Mint by Shivam Thakral, chief executive officer, BuyUcoin, a cryptocurrency exchange, said, “The government’s move is expected to boost institutional adoption of crypto assets. We are eagerly waiting for positive regulatory guidelines from the finance ministry and the Reserve Bank of India for more clarity on crypto regulation in India. Indians have already invested around $1.5 billion in crypto assets, which clearly shows their intent towards embracing digital assets.”
As per the reports published in February, companies like Tesla balance sheet shows $1.5 billion worth of bitcoin assets. Another international company like Microstrategy, a business intelligence (BI) firm, earlier in March, announced buying an additional $10 million in bitcoin.
Internationally, companies are investing in Bitcoin. And, even in the Indian business diaspora, companies are eyeing virtual currencies.
On the notification, government asking the disclosure of the crypto assets by the companies, in a statement to Mint, Pallav Narang, partner at CNK RK & Co. Chartered Accountants shared, “Whether it is going to be taxed as business income, capital gains or speculative income, it is still to be tested. But this information will certainly be mined by the income tax authorities to verify whether people have paid taxes on this particular income or not.” Further, he said, “The government’s intent seems to include and regulate cryptocurrencies.”