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Sunday, 12 November 2017

Taxing Bitcoin Transaction-A Perplexing Issue


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
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