Paying Taxes on Bitcoin Sales: Indian Bitcoin Investors

The investors of India have to face the tax payment for their bitcoin trade. They found that they are the subject of the paying tax in their bitcoin trade which is a warning of Reserve Bank of India against their trading.

In the beginning of this month itself, the country’s central bank has given the second warning for the traders and for the public cautioning them about the digital currencies, especially about bitcoin. On 5th December RBI has warned the adopters giving a notice showing and explaining the potential economic, financial, operational, legal, customer protection and security related risks with the use of virtual currencies.

An Engineer working at an American IT company in Bengaluru namely S Shridhar reported to The Economic Times that due to this warning and announcement many investors have started to sell their coins. Paying the attention to the notice issued by the RBI the mean named Shridhar has sold 20 bitcoins on Friday which have a worth of 21.8 million rupees. Then only his tax advisor told him about the payment of tax seeing that he transferred his return from the trade to his bank account.

Depending on whether the digital currency is considered as a business income or a capital gain, experts said that returns from the cryptocurrency could attract as much as 20 to 30% tax.

Jeenendra Bhandari, a partner at tax advisory firm MGB, explained:

“In case anyone sells bitcoins, the gains would definitely attract taxation, depending on his intent to categorise the gains either as business income or capital gains. There is no specific amendment to income tax law required to determine bitcoin taxability”.

Not only this, but tax departments could consider the trade from selling the digital currency as business income, treating it as speculative business and attracting regular tax rates, according to Amit Maheshwari, a partner at Ashok Maheshwary & Associates LLP Chartered Accountants, added that:

“If anyone is selling bitcoins and the money comes in his bank account, this would attract either long-term capital gain tax, depending on the holding period”

Maheshwari said that long-term capital gain at 20 percent could be levied if the coins were held for at least 36 months and the short-term gains would see 30 percent added. Because of the warning was given by the RBI in India there is a rush among the traders to sell the coins. This came in the time when the retailers in India were quickly adopting bitcoin, despite soaring premiums.

Moreover, in India, the bitcoin is not either considered as illegal nor as legal. And in this ambivalent situation, the Supreme Court of India call on the government to issue clear guidelines for the public and traders regarding the use of bitcoins to regulate its flow to the country.

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