Taxing in itself is a cumbersome job, add in the current take of Indian governance towards Cryptocurrency and the complexity piles up. Virtual currencies were touted to be more secure than real money when they first upsurged. However, for the Indians who chose to be a part of the Bitcoin family have to now face the gruesome task of filling tax on gains accrued by investing/trading/mining cryptocurrencies.
On one hand, The Reserve Bank of India (RBI) raises its concern regarding the regulatory framework governing cryptocurrencies and maintains an ambiguous stance on the validity of such investments. While on the other, investors still have to incur taxes for holding/trading/mining virtual currency. Even though there is no separate statute in the law book detailing tax norms for cryptocurrencies, but the law is clear on taxing income irrespective of the form in which it is received.
Presently, RBI has outlawed cryptocurrencies and prohibited banks from dealing with cryptocurrency exchanges. But people who have had invested in cryptocurrencies before this ruling are liable to pay taxes. Moreover, the I-T department has the investors under scanner after they served around 5,00,000 notices(to investors), upon their across the country survey of cryptocurrency exchanges in December 2017.
Also Read:- Tax and Cryptocurrencies: 4 Facts You Should Know
Cryptocurrency Mining requires expensive hardware and continuous flow of huge electricity due to which it is a capital-intensive activity. However, income generated by mining of cryptocurrencies is self-generated and thus the cost of acquisition cannot be ascertained. Further, the Section 55 of the Income Tax Act, 1961, that lays down the template for computing the cost of acquisition for self-generated assets does not include cryptocurrencies. Meaning, the miners are exempted from the tax net, until the government amends the I-T Act to include the virtual currencies.
Rohit Kukreja
Rohit Kukreja is a Commerce graduate with Financial Markets expertise involving Stocks, Forex, Futures & Options Market and now Bitcoins & Cryptocurrency Markets. Blockchain Enthusiast but not a techie, Rohit is an active member of various Blockchain & Crypto communities all over India.
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