Friday, March 23, 2018

Bitcoin and Income Tax India- Is Bitcoin Income Taxable?

Indian Tax officials have sent over 100,000 notices to cryptocurrency traders in the country. These individuals – which includes real estate agents, young investors, and jewelers in large number – have not declared about their crypto-endeavors in their income tax return, said Sushil Chandra, Chairman of Central Board of Direct Taxes (CBTD).

"People who have made investments [in cryptocurrencies] and have not declared income while filing taxes and have not paid tax on the profit earned by investing, we are sending them notices as we feel that it is all taxable," Chandra said.

bitcoin-and-income-tax-india
Bitcoin and Income Tax India
This has led to a mass confusion in regards to Bitcoin and income tax India. Many big players, in panic, are now left wondering, is Bitcoin income taxable in India?

If you’re one of them, let’s un-riddle the answer.

Income Tax on Bitcoin in India: Absence of Regulations

In India, Bitcoin, or cryptocurrency market at large, is unregulated in India. Meaning, there are no definite provisions that define how profits made from Bitcoin trading/investing would be taxed.

Also Read: What if Bitcoin becomes illegal in India

Under which heading the income from Bitcoin will fall is still not clear. It could be treated either under ‘capital asset’ or ‘income from other sources’. So we’ll take both of these scenarios to elaborate further.

Scenario #1: Bitcoin Profit treated as capital gain

Capital gain can be either long-term or short term.

If you’re a Bitcoin investor who held this cryptocurrency for 3+ years and have transferred it in an exchange for real currency, you will have to pay flat 20 percent of your profit as a long-term capital gain.

On the other hand, if you have held Bitcoin for less than 3 years and transferred it an exchange for real money, your short-term gains would be taxed at a rate as applicable to the tax slab you fall under.

If you’re a trader who is making a profit by buying and selling Bitcoin, your profits will be treated as business income. In this case, too, you will be taxed according to the tax slab your income fits in.

bitcoin-and-income-tax-india
Income Tax on Bitcoin in India

Scenario #2 Bitcoin Profit treated under ‘Income from other sources’

The fifth head of income tax, ‘income from other sources’ includes any source of income that cannot fall under the heading of salary, capital gains, business, profession and house property.

If Bitcoin profit qualifies as an income from other sources, you will be taxed as per the applicable income tax slab.

What if someone gave you Bitcoin in a transaction?

Like you’re selling products and services for Bitcoins.

In this case, the Bitcoins you received would be treated equally to receipt of money. And given you got this receipt in a profession or business transaction, the profit would be taxed under profit or gains head from profession or business.

Declare the income from Bitcoin (and other Cryptocurrencies) when filing taxes. Pay the government’s part. Be honest. Let’s not give authorities the reason to ban Bitcoin in India. Share this article and let others know.

Here's a nice Income tax calculator-


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