Cryptocurrency enthusiasts and investors in India are now eligible to pay taxes on any gains accruing from the cryptocurrency gain. The income tax department raids on all the Indian cryptocurrency exchanges on 13 December. There are nine cryptocurrency exchanges in India, and they are located in Delhi, Gurugram, Mumbai, Pune, Bengaluru, and Hyderabad. According to the statement given by the I-T authorities, the raids were conducted to obtain information about transactions, parties involved and bank accounts used as a part of the authority’s broader efforts to profile, examine and assesses the potential clients who pose a risk of tax evasion.
Taxation on bitcoins will be fit depending on how the buyer or investor treats income from bitcoins, based on the frequency of transaction. If the gains from bitcoins are arising due to trading, it will be treated as business income. In case the benefits occur due to rising in prices while you keep it as an investment, the earnings will be regarded as income from additional sources.
Suppose, the enthusiast buys and sells bitcoins regularly, then the gains from the sale of bitcoins will be business income, and the loss would be a business loss. In such a case if the enthusiast holds a bitcoin for a longer term and then sell it, the profit will invite capital gains tax. Bitcoins will be treated as capital assets if it is bought for investment purposes.
This means if one holds bitcoins for not more than 36 months, the gains arising from it will be considered short-term capital assets. In case of short-term capital gains, the gains from the sale of bitcoins would be taxable at the enthusiast’s applicable slab rates plus surcharge and education cess.
If one make gains after holding bitcoins for more than 36 months, then the long-term capital gain will be applicable on that person and will be taxed at 20% plus applicable surcharge and education cess, with the benefit of indexation.
What you should know?
Most bitcoin exchanges in India ask their users to comply to full know your customer (KYC) process before they start buying bitcoins on their platform.
Hence, they have access to the buyer details such as permanent account number (PAN), bank account details and Aadhaar number, which they can provide to the I-T department in case of any scrutiny.
Even if bitcoins are not specified in the income tax Act, one still has to pay taxes. As of now, there is not enough clarity on bitcoins regarding regulation. So, it would be advisable to seek professional help while filing one’s returns in case of any gains from bitcoins.