Are gains from bitcoin trade taxable?

Bitcoins are back  in news, after its prices crashed to $3000 level in 2017. The currency gave the return of around 307% in 2020 and is currently trading around $38,000 level . But before you dabble in the cryptocurrency, you should know that buying virtual currencies is not illegal in India, but it is not recognised by law either, and their taxability is a question mark.

Are Bitcoins taxable?

According to law, if you have made profits then it should be subject to income tax. Hence if you have made profits on Bitcoins, it should be taxable, too. The question is under which head it should be taxable? Should it be treated as Capital Gains? Or should fall under Income From Other Sources?

Gains from Bitcoins taxed as Capital Gain?

In the absence of any specific guidance some tax experts say that it should be classified as an asset and taxed as Capital Gain.

Accordingly,  it can be classified as long term if held for more than three years and short term if held for less than three years. While long term is taxable at 20% post indexation, short term capital gain is clubbed with your income and taxed according to your tax slab.

A few tax experts say it should be considered as “income from other sources” and taxed accordingly. Income from other sources is added in your gross income and taxed as per your tax slab.

Money9 says that Bitcoins are highly risky and volatile. But if you still want to invest in the currency don’t forget to pay taxes on the profits made.