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CBDT head says gains from investments in cryptocurrencies such as Bitcoin are taxable

In December, the income tax department issued few lakh notices to those who had invested in virtual currencies and had also conducted pan-India survey at their exchanges

February 06, 2018 / 05:28 PM IST
LocalBitcoins | This peer-to-peer exchange allows people from different countries to exchange their local currencies to bitcoins. Users post advertisements on the exchange stating their exchange rate and preferred payment method for buying or selling bitcoins. By replying to these advertisements, a trade is opened and escrow protection is automatically activated. Escrow protects both buyer and seller, by keeping the bitcoins safe until the payment is done and the seller releases bitcoins to the buyer. Bitcoins are placed in LocalBitcoins web wallet from where one can pay for their bitcoin purchases directly. However, investors need to be aware of scams as they are dealing directly with other people unlike other stock-like exchanges or centralized bitcoin trading sites.

LocalBitcoins | This peer-to-peer exchange allows people from different countries to exchange their local currencies to bitcoins. Users post advertisements on the exchange stating their exchange rate and preferred payment method for buying or selling bitcoins. By replying to these advertisements, a trade is opened and escrow protection is automatically activated. Escrow protects both buyer and seller, by keeping the bitcoins safe until the payment is done and the seller releases bitcoins to the buyer. Bitcoins are placed in LocalBitcoins web wallet from where one can pay for their bitcoin purchases directly. However, investors need to be aware of scams as they are dealing directly with other people unlike other stock-like exchanges or centralized bitcoin trading sites.

The income tax department will obtain taxes that are due on investments on cryptocurrencies such as Bitcoin, Central Board of Direct Taxes head Sushil Chandra said on Tuesday.

“Investment in any asset, if it is not explained, whether it is jewellery or a house, it has to be taxed. And if it there is a capital gain on this, then it is taxable,” Chandra at a post-budget industry event.

“We need to see two things--how much investment has been done and whether it is from legal sources or not. If one has gained money from that, then it will be taxable,” he said.

In December, the income tax department issued few lakh notices to those who had invested in virtual currencies and had also conducted a pan-India survey at their exchanges.

In Union Budget 2018, Finance Minister Arun Jaitley said that the government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.

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Time and again, the RBI has warned traders of the perils of using virtual currencies. In 2013, the apex bank had cautioned the users, holders and traders of virtual currencies, including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.

Such currencies are stored in electronic wallets and are prone to losses arising out of hacking, loss of password, compromise of access credentials, and malware attack, the RBI had said.

The issue of virtual currency has vexed regulators and governments around the world.

Though termed as the world's first decentralised cryptocurrency - Bitcoin - also evokes comparisons with precious commodities (not least because some precious commodities like gold are also equated with currencies, or considered a store of value).

Bitcoin has had a phenomenal rally over a year’s time. It gained momentum in India in the wake of demonetisation, but the popularity also raised concerns on whether people may be using it to launder black money. However, lately, it has seen a slide in its valuation.
first published: Feb 6, 2018 05:28 pm

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