Still not paid taxes on Bitcoin gains? I-T notice could be on the way
Still not paid taxes on Bitcoin gains? I-T notice could be on the way on Business Standard. Based on the holding period, you have to pay short-term or long-term capital gains tax
Latest News While virtual currencies like Bitcoin are gaining popularity, there is still lack of clarity on how they should be taxed. Many buyers of cryptocurrencies, therefore, don’t pay tax on the gains they make on selling them. Software developer Pawan Bharti recently sold Bitcoin worth Rs 55,000 after his investment doubled. “Neither my friends nor I am aware that we need to pay tax on these gains,” says Bharti. He is planning to invest the money in fixed-income instruments. Tax experts, however, say that investors are obliged to pay tax on their gains in virtual currencies. “What investors don’t realise is that the Income Tax Act may not cover the taxation of virtual currencies specifically. But there are provisions that cover all kinds of income and gains,” says Archit Gupta, chief executive officer, ClearTax. The definition of capital assets under Section 2 (14) is broad enough to include any investment in crypto currencies. The taxation of virtual currencies will depend on
the purpose for which an individual buys it, say experts. If a person has purchased a virtual currency to pay for goods, then there should be no tax. It’s as good as cash in the wallet that one uses for transactions. But the use of virtual currencies for such payments is less common. Most people buy it to make a profit on price changes. Any profit arising out of the sale of virtual currencies can be construed as capital gains, according to tax experts. “Accordingly, the capital gains tax will be applicable depending upon the holding period of such investments,” says Suresh Surana, founder, RSM Astute Consulting Group. If these are held as an investment for three years or more, the gains will be considered as long-term capital gains. The investor will need to pay 20 per cent tax after considering indexation benefit. If an individual sells it within a shorter time period, the gains will be treated as short-term capital gains. The profit will be clubbed with the investor's income and he will have to pay tax depending on his income tax slab. If the transactions in bitcoins are substantial and frequent, it could be said that the individual is
trading in bitcoins.
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