Tax dilemma of cryptocurrency trading in India.

Bitcoin has crosses US $ 17,000 mark and news papers , television channel are daily having one item of news on crypto currency everyday. People who have invested in crypto or have been mining from their home have realized that now they are sitting on hefty profits.

(Picture source https://pixabay.com/en/bitcoin-currency-crypto-cyber-2057405/)

World over crypto currency is a hot topic. In USA future trading of Bitcoin has started, Venezuela is going to start its own currency and many more countries are actively considering issuing of their own official crypto currency.

For Indians too, like the world over it is a hot topic to discuss and to get involved before they miss the bus. The Reserve bank of India issued a warning citing the dangers of dealing in crypto currency. it simply called it not legal. Meaning it is not illegal also. Therefore a dilemma is growing about how to deal with crypto currency trading and the profits generated with it.

Recently there was a news item that Income Tax department is going to issue notices to ones who have earned good money from selling Bitcoins.

Now there is dual side of trading in crypto currency.

A. Profits earned from trading or selling the currency will it be taxed @ 20% as capital gains (ig the currency was held for more then 36 months) or @ 30% as if it was earning fro business. Since there is no provisions under the Indian Income Tax , a hot debate is going on among the Tax experts of the country. However there are some who wants to avoid the tax problems, they have started to pay tax on their profit as if it was an earning from business. Still tje picture is not still clear. May be in coming days or months the Government will come out with clear directions. Otherwise it would be cause of disputes for a long time to come.

B. Another interesting part of crypto currency is about its nature. One may ask what is it? It is no currency, it is not recognized by any Government, it is not a physical thing. There is another law called Goods and Service Tax which is applicable on supply of goods and services.

Buying and selling crypto currency is like a contract between buyer and seller which is done for a consideration. Now that consideration (Price) may be considered the value under the GST because what is sold is the contract. Therefore there is a possibility that GST authorities may also put a stake on these contracts and another chain of legal battle may start before long. However to counter the argument of GST a majority of expert believe that it is like buying and selling of currency on exchange and GST if applicable, can be charged on the commission or fees charged by the exchanges only and not on the total amount of the transaction.

However the future hold the secret and all we can do is to wait only.