India-based investors may soon have to pay taxes on returns earned from bitcoin investments.
The country’s income tax authority is tracking investors making money amid the ongoing bitcoin price rally and is all set to demand taxes, two sources familiar with the matter said, according to The Economic Times (ET), a business-focused daily newspaper.
The tax department collected information about bitcoin trades executed through banking channels before the Reserve Bank of India’s (the country’s central bank) crypto ban took effect in April 2018. The Supreme Court overturned the ban in early March, bringing cheer to both investors and local cryptocurrency exchanges.
“The tax authority can also monitor earnings of cryptocurrency investors registered through KYC/AML compliant exchanges like CoinDCX and through national identity documents such as the PAN card,” Sumit Gupta, CEO of Mumbai-based cryptocurrency exchange CoinDCX, told CoinDesk, referring to know your customer/anti-money laundering rules.
Some experts are anticipating a 30% tax on cryptocurrency gains and many are advising their clients to file bitcoin returns as capital gains, which are associated with stocks, according to the article.
Amit Maheshwari, a partner at tax and consulting firm AMK Global, told the newspaper that bitcoin’s active trading would be treated as a speculative business and attract normal tax rates. In contrast, authorities may treat one-off or infrequent transactions as capital gains, long-term or short-term, depending on the holding period, and levy a concessional rate of capital gains.
The tax authority has not yet categorized returns from cryptocurrencies under any specific bracket. “Currently, if an investor submits his Income Tax declaration, the amount of earnings generated by investing in cryptocurrencies is highlighted under Income from Other Sources,'” Gupta told CoinDesk.
The clarity on the tax and regulation front may bring more investor participation. While the Indian government does not consider bitcoin legal tender, holding cryptocurrencies is not necessarily illegal or banned.
Back in September, the government was reportedly mulling a new law prohibiting cryptocurrency trading. However, according to a think tank, the government would be better off legitimizing bitcoin by regulating it like corporate stock.