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Taxation On Bitcoin (Cryptocurrency) in india

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Published on 28 Jan 2021 / In Other

Taxation On Bitcoin (Cryptocurrency) in india:
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.


Bitcoin is Legal in India : Bitcoin is not illegal in India now. After the Supreme Court Judgment on March 2020. India's Supreme Court made a landmark decision, and on March 4, 2020, the ban was lifted and restrictions on trading bitcoin in India lifted. A major win for the entire cryptocurrency community in India, which has benefited from the ongoing legal battle between the RBI and the Reserve Bank of India over the ban on cryptocurrencies. In a landmark decision, the Supreme Court ruled that the RBI's circular placement ban on cryptocurrencies is illegal and will be lifted in March 2020

How Bitcoin is taxable in India :

1. By Mining : No Capital Gain Chargeable to Tax on Sale of Asset acquired by way of Adverse Possession for any Cost of Acquisition u/s 55(2) despite Amendment in the Income Tax act in the year 1995 covering those assets which are having a NIL cost of acquisition. However the amendments still don’t cover the transactions on account of proceeds from reverse possession thus do not attract any capital gains. Since, the cost of acquisition of such Bitcoins is not available, the taxpayer can take the benefit of judgment of the Supreme Court in the case of B.C. Srinivasa Setty [1981] 5 Taxman 1 (SC).

2. Transfer of Money Buying of Bitcoin from exchange : In view of Section 2(14) of the Income-tax Act 1961, a capital asset means a property of any kind held by a person, whether or not connected with his business or profession. The term 'property', though has no statutory meaning, yet it signifies every possible interest which a person can acquire, hold or enjoy.
In that case it’s a Deemed to be capital assets and capital gain will be applicable. In case of short term it would be taxable as per slab rate and in case of long term capital gain would be taxable at 20% flat rate.

3. In consideration of selling of good or services to third party: In that case cost of acquisition is equal to his consideration of sell price or service cost.
It would be the business income for the organisation and tax as on normal business income.
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