The latest gains for Indian Bitcoin investors, from the recent surge of Bitcoin prices might have to be shared with an unwanted visitor – the tax department.
The Indian tax department is keeping an eye on the crypto prices and tabs on investors who are leaving after Bitcoin surged to its highest price in India. The tax department has information on investors who traded via banking channels prior to the Reserve Bank of India legally prohibiting cryptocurrency. Now, that information is being put to use.
According to two people, the revenue officials are now ready to call for tax revenue on the profits. But the experts anticipate issues in taxing crypto profits. Rakesh Nangia, the managing partner of Nangia Andersen India says:
“The tax laws were not framed to bring cryptocurrency to tax and a definitive circular by revenue will give certainty to its taxability. Moreover, the taxability of bitcoin or cryptocurrency is a complex issue and there is not much precedent around this in case laws or judgments.”
Cryptocurrency Gains can Attract up to 30% Tax
According to experts, the gains from selling cryptos could draw up to 30% tax, since they think that the tax department may classify the income from selling Bitcoins as business income.
Further, Amit Maheshwari, a Partner at AKM Global, a tax and consulting firm has stated, “Active trading of Bitcoin could be treated as a speculative business and would be taxed at normal tax rates. For other cases, like one-off or infrequent transactions, the tax authorities may also treat it as capital gains, long term or short term, depending upon the holding period and the concessional rate of capital gains can be applied.”
According to people with the information, the tax department will be re-evaluating the information they have on traders who retained or traded in cryptos.
“The tax department is only looking at data”
Additionally, according to a person who has direct information on the current situation stated to The Economic Times,
“In all probability, these are the same investors who would go back to this asset class (cryptocurrency). Right now, the tax department is only looking at the data, tax scrutiny and notices may follow if anything comes out of it,”
Several tax experts are recommending their clients classify their gains on Bitcoins as capital gains, similar to what is computed on stocks.
Even after RBI regulations have come into force, numerous investors are still retaining Bitcoins. In some situations, since Bitcoin started rising a few months ago, some investors even hurried to purchase more for short term investment.
This isn’t the first time that cryptocurrencies have been on the radar of the tax department. Similar news was also reported in 2017, where investigations of promoters and higher-level executives of some Bitcoin exchanges were called to justify their business model and what amount of indirect tax can be charged – either value-added tax or service tax.