With the Budget 2018 round the corner, all eyes are on Finance Minister Arun Jaitley as he is going to present the Union Budget on February 1. Everyone has expectation from him. So, some clarity is also needed regarding the taxability of Bitcoins in India.
It is known to all that the price of Bitcoins has sky-rocketed in India in the past one year. It has shot up more than 2000% during the same period and a lot of people have made a lot of money. The craze for Bitcoins amongst Indians has also been rising and a lot of people are buying Bitcoins with the hope that the price will increase further. The growth of several Bitcoin exchanges in India has also made buying Bitcoins much easier.
However, confusion still prevails in the minds of investors on how income tax would be levied on the gains arising from Bitcoins. There is confusion regarding whether the gains arising from the sale of Bitcoins would be considered as speculative income or non-speculative income. Confusion also pertains to the head under which tax would be levied – would it be considered as Income from Business or Capital Gains or Other Sources?
People don’t mind paying taxes, but at least there should be clarity from the government about how they intent to tax the Bitcoin income. Nobody wants to face tax scrutiny from the tax officials at a later stage. However, in the absence of any clear cut guideline from the government, it is getting very confusing to determine the actual tax liability.
Different tax professionals are giving different opinions and different opinions have also been published in the media. In the absence of any clear guideline, the confusion is plenty and therefore the government should give some clarification on how they intent to tax the Bitcoin income.
GST on Bitcoins
Apart from income tax on Bitcoins, another issue is whether GST would be levied on Bitcoins or not. Again there is no government stance on this, although news reports suggest that the government has started working on this and clarity is expected soon.
The RBI does not treat Bitcoins as a legal currency in India. As it is not a currency, it should be considered as goods and GST be levied @12%, or it should be considered as a service and GST be levied @18%.
Currently, people are not paying GST on Bitcoins, but the government is working on it and a clarity, if given by FM Arun Jaitley about the same in the Budget 2018, would clear the air about the taxability of Bitcoins in India.
(By Karan Batra, Founder & CEO of CharteredClub.com)