On December 13, Indian Income Tax department surveyed major cryptocurrency exchanges across the country including exchanges in Mumbai, Pune, Bengaluru, Delhi, Hyderabad, and Gurugram. The survey was conducted to identify parties involved, extract information about transactions and funnel down assesses who poses the risk of tax evasion.
Income Tax department would be issuing a notice to 4- 5 lakh HNIs in India involved in crypto trading.
Currently, cryptocurrency is neither legal nor illegal in India. Although, RBI has been issuing warnings over cryptocurrency from time-to-time. Nappinai N S, Advocate at Supreme Court and Bombay High Court had stated that since Bitcoin and other cryptocurrencies are still not under the purview of Indian constitution hence it can’t be termed either legal or illegal, as per the article on Inc42.
Bitcoin Exchange Coinsecure stated “Senior officials from the income tax department conducted a survey across our Delhi and Bangalore offices in an attempt to gauge and comprehend the state of Bitcoin in India… The broad sword of discussions was to understand Bitcoin and cryptocurrencies and their users, The officials had requested data to try and analyse taxability of Bitcoin. Everything was extremely routine and all exchanges in India have gone through the same process cooperating and coordinating with the authorities.” as published in Businesstoday.
How would be cryptocurrency taxed in India?
If an individual is dealing with Bitcoin or other cryptocurrencies, then the individual has to pay taxes for income on crypto transactions. Taxation will be dependent on the frequency of transactions. Currently, cryptocurrencies would be treated as digital assets and hence, an individual is liable to pay tax.
If the income is arising due to trading, then the income would be treated as business income. In case an individual holds bitcoin for a duration, then he is liable to pay capital gains tax. If the duration is not more than 36 months, then short-term capital gains tax is liable on the profit. The gains would be taxable at your applicable slab rates with surcharge and education cess.
In case the asset is held for more than 36 months, then an individual is liable to pay long-term capital gains tax. The transaction would be taxed at 20% plus applicable surcharge and education cess, with the benefit of indexation
Things to Know
Currently, bitcoins or cryptos are not mentioned in the Income Tax Act, still one has to pay taxes. Since there is no clarity on the regulatory framework for the cryptocurrency, it would be advisable to take professional help while filing your return.