Barely ten months after the Indian Supreme Court lifted the RBI’s ban on cryptocurrency transactions, fresh reports from yesterday revealed that the country’s tax authority is now keeping a close watch on crypto traders as Bitcoin’s price continues its bullish trend.
Taxing Crypto Gains
According to local media, the Indian Tax Department is already in possession of data belonging to investors who invested in Bitcoin or cryptocurrencies through banking channels before the RBI’s ban in 2018.
This development is coming after data shows a tremendous increase in crypto trading activities in India. Since the crypto ban was lifted earlier this year, retail investors between the ages of 25 and 40 have been spending millions of dollars on crypto trading every day.
Over $25 Million Daily
Two of India’s largest crypto trading platforms, Binance-acquired WazirX and CoinDCX, saw a significant increase in activities over the last six months. According to an earlier report, WazirX recorded a massive 125% increase in user signups in the last two quarters. The exchange also has a daily trading volume of $19-26 million, with more than 85% of the transaction coming from Indian traders.
Some experts believe it will be difficult for the country to tax crypto because there’s no regulation in place for crypto dealings. They feel a regulatory framework will provide the needed clarity to make taxation easier. While India is yet to release its crypto regulation, an earlier report suggests that the country may regulate crypto as commodities.
Declaring Bitcoin Profits As Capital Gains
Although it is unclear how India plans to implement the tax law, sources familiar with the matter claimed that the country’s taxman is already preparing to collect tax on the gains made from Bitcoin. And notice may be sent out to investors if “something goes out of this.”
Experts believe that the tax authorities may classify crypto gains as business income, and investors may have to pay up to 30% tax on profits made from selling cryptocurrencies.
However, some tax experts are advising their clients to declare their Bitcoin earnings as capital gains, which is similar to profits generated from shares.