Digital gold, refers to the buying and selling of gold in a digital form. In India, digital gold has become increasingly popular as a way to invest in precious metals without the need for physical storage. This is because of the number of benefits of digital gold.
However, there is often debate about the regulation of digital gold in India. Many people are wonder whether digital gold is legal in India.
In this blog post, we will explore the legal status of digital gold in India and discuss the major keywords related to this topic.
Role of Government in the Regulation of Digital Gold in India
The regulation of digital gold in India is subject to various conditions put forth by various regulatory authorities in India.
Reserve Bank of India (RBI) And Securities and Exchange Board of India (SEBI)
- The Reserve Bank of India is the central bank of India and is responsible for regulating the country’s monetary policy. It is also majorly responsible for the regulation of digital gold in India.
- As concerns grow over the unchecked growth of such investments without the investor protections that apply to regulated securities, the Securities and Exchange Board of India (Sebi), and the Reserve Bank of India (RBI) are working to bring digital gold under some regulatory oversight.
- In order to classify digital gold as a security under the plan, the government may change the Securities Contracts Regulation Act and the Sebi Act.
- It also states that, brokers and investment advisors are not allowed to make transactions involving digital gold. Majority of the regulation of digital gold in India is taken care by this body.
Goods and Services Tax (GST)
In India, all goods and services are subject to GST. Digital gold is considered a “good” under GST laws. It is subject to a 3% GST. This way, the regulation of digital gold is taken care by the GST council of India.
This means that when you purchase digital gold, you will be required to pay an additional tax on top of the price of the gold.
Foreign Exchange Management Act (FEMA) –
FEMA is a law that regulates foreign exchange transactions in India.
In 2020, the Reserve Bank of India issued a circular stating that digital gold is considered a “good” under FEMA. It is subject to the regulations that apply to goods.
Bullion Association of India (BAI)
BAI is a trade association of bullion dealers in India.
In 2020, BAI issued a statement stating that digital gold is not considered a physical commodity. T herefore, it is not subject to the regulations that apply to physical commodities.
Takeaways
In conclusion, digital gold is legal in India, but it is subject to various regulations.
- The Reserve Bank of India has not specifically banned digital gold, but it has banned banks from providing services to cryptocurrency exchanges.
- Digital gold is also subject to GST. It is not considered a security or a physical commodity.
- The Securities and Exchange Board of India and the Bullion Association of India have issued statements stating that digital gold is not subject to the regulations that apply to securities and physical commodities respectively.
It is important to note that the government has not yet released any specific statements about the regulation of digital gold in India. This means that while it is legal, there are no explicit guidelines on how digital gold should be traded.
It is therefore recommended that individuals use caution and conduct thorough research before investing in digital gold.