Bitcoin and Other Virtual Currencies To Be Taxable: Income Tax Department
Surveys were conducted by the income tax department on December 13 looking at exchanges of bitcoin across the nation, consisting of exchanges in Pune, Mumbai, Delhi, Bangalore, Gurugram, and Hyderabad. According to the authorities of the IT Department, the inspection was carried out to pull data about parties involved, transactions, and bank accounts utilized as a part of the broader efforts of the authority to profile and inspect assessees who create a risk of tax avoidance.
If someone as a person trade or invest in cryptocurrencies, for example, bitcoins, they have to shell out taxes on any profits ensuing from a cryptocurrency transaction. Bitcoins taxation will be pertinent based on how you treat revenue from bitcoins, dependent on the occurrence of transaction. If the benefits from bitcoins are increasing owing to trading, it would be considered as business revenue. In case, the profits boost owing to the rise in values while you embrace it as an investment, the profits will be considered as revenue from other sources.
Assume you purchase and trade bitcoins on a regular basis, then the profits from the trade of bitcoins will be trade revenue and the loss would be trade loss. For instance, if you cling to a bitcoin for an extended duration and then trade it, the revenue will draw capital gains levy. Bitcoins will be considered as capital assets if one purchases it for investment reasons.
This implies if you cling to bitcoins for not over 36 Months, the profits coming from it will be deemed short-term capital benefits. In the instance of short-term capital profits, the benefits from the trade of bitcoins will be taxable at your relevant slab rates along with education cess and surcharge. If you make profits after having bitcoins for over 36 Months, then the long-term capital benefit will be valid—you will be levied at 20% along with relevant education cess and surcharge, with the advantage of indexation.
The majority bitcoin exchanges in the country request you to conform to complete know your customer (KYC) procedure prior to you begin purchasing bitcoins on their interface. Thus, they have access to one’s private data such as bank account details, Aadhaar number, and permanent account number, which they can offer to the IT department in any instance of inspection.
Though bitcoins are not stated in the Act of income tax, you still have to shell out levies. For now, there is not sufficient transparency on bitcoins when you take regulation into consideration. So, it would be wise to ask for professional assistance while returns filing in case of any profits from bitcoins.