In a move to bring transparency and regulate cryptocurrency dealings in India, the Ministry of Corporate Affairs (MCA) has mandated that all companies disclose all transactions in cryptocurrencies or virtual currencies in their balance sheets. A cryptocurrency is a digital asset used as a medium of exchange for goods and services. In simple words, a cryptocurrency is nothing but digital money.
As per the latest MCA notification, if a company has traded or invested in cryptocurrency or virtual currency during a financial year, they will need to disclose the profit or loss on transactions involving cryptocurrency or virtual currency, the amount of currency held as on the reporting date, and the deposits or advances from any person for trading or investing in cryptocurrency or virtual currency. This new rule will come into effect from 1st April 2021.
In 2018, the Reserve Bank of India (RBI) had banned banks from processing cryptocurrency transactions. However, in March 2021, the Supreme Court had lifted this ban. Recently, the government had even proposed a bill to regulate the various issues in cryptocurrency dealings, but there has been no official word.
The new notification by the MCA comes at a time that will help clear some of the ambiguity surrounding cryptocurrencies. Investors will be put at ease, knowing that the government will regulate transactions and taxation on cryptocurrencies. This will also help the government in gathering information on digital currencies in India.
Besides new rules on disclosure of dealings in cryptocurrencies, the new MCA notification has also mandated companies to disclose details relating to corporate social responsibility and details of Benami property held in their financial statements from the coming financial year. Other amendments included disclosures regarding title deeds of immovable properties that are not held in the company’s name, loans and advances granted to promoters, directors, KMPs and other related parties, relationship with struck-off companies, etc.
For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in
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