With a whopping return of 800 per cent that Bitcoin has given
over the last one year it has caught the attention of many in India. Thus, there
is a need to understand the IT nuances of their bitcoin transactions. Kindly
note Bitcoins in India are unregulated but are not yet illegal. However, the
RBI has on occasion cautioned investors of inherent risks. An
inter-disciplinary committee set up by the government is examining the
framework of virtual currencies.
Tax Implications
Even
though Bitcoins are not specifically mentioned in the income tax act, Bitcoins
are assets which are usually owned so holder can gain from an increase in its
value. In that sense, they acquire the definition of capital gains. Which is a
wide definition as per the Income Tax Act. Accordingly these can be classified
as long-term when held for more than 3 years and short-term when held for less
than 3 years. In case of long-term gains indexation benefit must be allowed and
gains taxed at 20 per cent. Short term gains will be taxed as per the
applicable income tax slab.
But
there is a hitch involved, where there are too many trades in Bitcoins the
owner may be classified as a trader and income will have to be reported as
income from a business. In the absence of specific guidance on the matter, some
taxpayers may choose to report this income under the fifth head of income which
is income from other sources.
Conclusion
According
to the law if somebody makes some money that should be subject to income tax. Realizing
the growing popularity of crypto currencies, the government formed a committee
this year in April to give recommendations for regulating the crypto currency
market. The report is yet to come out. Having said that, mining, buying and
selling virtual currencies is not illegal in India, but it is also not recognized by law either. There is a question mark on the taxability aspect
too. So if you have been trading or investing do make sure any gains from the
sale of Bitcoins is included in your income tax return.
Source: TOI, BT. Compiled and presented by Preetham
Shetty & Co. Chartered Accountants
For expert assistance do contact us at 9900397777/
mail us at info@preethamandco.com
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