Bitcoin investors in India may face taxes on their Bitcoin sales profits. The news came from the second warning by the country’s central bank that aims at the public cautioning against digital currencies – in particular bitcoin.
In times when Bitcoin is rising to a new peak, the public in India wants to regulate things. On December 5th, the RBI warned many adopters about the potential financial, legal, economic, customer protection as well as security risks related to the use of virtual currencies.
The news has triggered a number of investors who decided to start selling their coins. One of them is an engineer working at an American IT company, named S Shridhar. His story is featured in an article published in The Economic Times, with him saying that he recently sold 20 bitcoins (21.8 million rupees then). After he sold them, he was told by his tax advisor that he may have to pay tax as he transferred his return from the trade to his bank account.
Regardless of Bitcoin earnings being a business income or a capital gain, many experts claim that returns could attract as much as a 20%-30% tax. According to Jeenedra Bhandari, who is partner at a tax advisory firm in India:
“In case anyone sells bitcoins, the gains would definitely attract taxation, depending on his intent to categorise the gains either as business income or capital gains. There is no specific amendment to income tax law required to determine bitcoin taxability.”
Tax departments could additionally consider the trade from selling the virtual currencies as a business income – and treat it as speculative business. In such scenario, Bitcoin profits may be subject to regular tax rates.
So, even though Bitcoin isn’t considered illegal in India, it is certainly not legal either. At this point, the tax on Bitcoin is an ambiguity that needs clear guidelines.
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