Recently Income Tax department conducted survey on Bitcoin exchanges operating in India.
4-5 lakh HNI's are targeted for further scrutiny.
My doubts are:
A large population still have no idea what Bitcoins or cryptocurrencies are!!!
Tax authorities are yet to issue any clarification on it.
Aim of any tax authority may it be Income Tax or GST is to collect more revenue.
Recent income tax survey is to inspect the transactions and finding the possibilities to collect tax on gains and profits made by investors or Bitcoin traders.
Similarly there will be further enquiry on applicability of GST on Bitcoins.
Now the interesting thing to look out for will be whether Bitcoins will be treated as currency or asset.
If Bitcoins are treated as asset then not only income tax but even GST will be applicable on transactions and a single transaction or multiple transaction with monetary volume more than 20 lakhs will make traders liable for GST registration.
RBI issued warning earlier that traders and investors have to trade on their own risk.
There has been no guidelines from government as of now regarding cryptocurrencies except few precautionary statements.
One thing is clear that Cryptocurrencies are future or at-least technology that power these currencies will be widely used in future.
As of now there is no specific ruling or stand taken by any government authority may it be Income Tax, GST or RBI.
However, income tax is applicable on profits made. GST applicability needs to be scrutinised.
How Bitcoin transactions will be taxed in India?
If IT department considers them as assets (property) then capital gain will be applicable on investments. For regular traders it will be taxed as income from business (speculation).
Whether it will be treated as business income?
For traders yes, it will be treated as income from business and profession (speculation business).
For investors we need to wait and watch. There is no clear notification on cryptocurrencies and stand is not clear. But as per me without any clear clarification it should be taxed as business income.
Whether trading in Bitcoin will result in capital gain or loss?
As of now it will be assessed as income from other sources or income from speculation business. Unless government or IT department clears whether Bitcoins are assets, stand is debatable.
Whether trading or investing in Bitcoin amounts to money laundering?
I do not think so. But transactions are being scrutinised. Money laundering is the process of making illegally-gained proceeds (i.e., "dirty money") appear legal (i.e., "clean").
However we have to wait and watch. Few countries like Japan have issued their view on cryptocurrencies but India is yet to clear the confusion and possible treatment.
What is stand of RBI on Bitcoin investment?
RBI has not released any document on how it treats Bitcoins, so one thing is clear that in India it is not a legal currency.
However RBI has issued a precautionary warning to trade in Bitcoins at once own risk.
Trading in Bitcoin is legal and allowed by Indian Government?
As already mentioned there is no official statement on this from government.
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