Cryptocurrencies are not new; Bitcoin has been around for over a decade. But their popularity is. Leading to an increase in cryptocurrency investment or trade across the world including India. And while it is not clear what regulations the impending law will impose, if you have traded in cryptocurrencies then you will be liable for tax. The question is which.
To date, India’s Income Tax Law does not contain any separate provision regarding the taxation of cryptocurrencies. The tax office has also not issued any formal guidelines. Tax experts, however, have taken one of two views.
That cryptocurrencies are an asset and therefore any gain is subject to capital gains tax. Or that, depending on the circumstances, income from the sale of cryptocurrencies may also be classified as business income or income from other sources and taxed accordingly.
Experts BloombergQuint spoke to said most individuals reportedly reported profits on crypto transactions as capital gains. They also said that the Revenue Department, so far, has not advocated for alternative tax treatment. But the popularity, and therefore the volume of trading, of cryptocurrencies has only grown in the past two years, for which tax assessments have yet to be completed.
When they do, the department can ask probing questions.