How profit from Bitcoin will be taxed in India?

Bitcoin is the buzzing word on social media and all want to become rich by investing in the crypto currency. Many Indian despite RBI warning has invested in to Bitcoin few months back and have made handsome gains. The question now remains is the gains on sale of Bitcoin is taxable under Income Tax Act? If yes then it shall be taxed as business Income or Capital Gains or something else ?

Any gain on Bitcoin is taxable as any gain on account of Bitcoin exchange is certainly (100%) taxable because the definition of income u/s 2(24) under Income Tax Act is inclusive, which mean every kind of income unless clearly exempt .

When will Bitcoin Tax Liability Arise

The buying and holding of Bitcoin wont attract any Income tax liability. The selling of Bitcoin will lead to profits or gains which will be considered as Income and taxed in India

Speculative Income

This is debatable on account of lack of any law related to taxation of Bitcoin in the Income Tax Act . It will be determined on the basis of each facts and circumstances. In case of trading it will be considered as speculative income and will attract tax as per slab rate of Individuals.

Capital Gains

If the transaction are not frequent and are in nature of Investment in the currency, it would be classified as capital gains and would attract either long-term capital gain tax or short-term capital gain tax, depending on the holding period. Long-term capital gains tax will be taxed at 20% if Bitcoins were held for at least 36 months. In all other cases, short-term capital gains tax at 30% would be applicable 

RBI warning

RBI issued fresh warnings, reminding investors that it has not authorised any entity to deal in Bitcoins and that any investor or trader dealing with virtual currencies "will be doing so at their own risk". 

Bitcoin sale by Non Resident

Income from sale of Bitcoins earned outside India and received outside India will not be taxable in India if you qualify as non resident or resident but not ordinarily resident in India. Subsequent remittance of the said income will also not be taxable in India. But since the issue is not a settled concept, there can be possible litigation with the tax authorities on this issue.

Advance Tax and Future

Advance tax deadline is on December 15, Bitcoin investors and their consultants are trying to figure out a way to deal with the returns on Bitcoin investment along with other cryptocurrencies. We can expect some clarity once the Finance Ministry finalises its opinion on a report on virtual currencies that was submitted to it recently. It would be interesting to see if GST will be applicable or not? Only future has answer to it.

For any query you can write to . Before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not takeany responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on

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CA Chirag Chauhan

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