The Income Tax Appellate Tribunal (ITAT) in Jodhpur in a recent ruling has classified cryptocurrencies as capital assets as per BSCN Headlines, providing clarity on taxation especially for transaction carried out before 2022 Virtual Digital Assets (VDA) regulations.
Pre-2022 Transactions: Capital Gains Classification
The ITAT’s has established the fact that the sales made before April 1, 2022 will be considered as capital gains rather than income from other sources. This establishment becomes crucial for the taxpayers, as it will determine the applicable tax rates and potential deductions.
Case Study: Long-Term Capital Gains
The tribunal examined a case where an individual had purchased Bitcoin worth ₹5.05 lakh in 2015-16 financial year and sold it for ₹6.69 crores in 2020-21. Considering the fact that the holding period exceeded 36 months, the ITAT ruled that the gains qualify as capital gains (LTCG), allowing the taxpayer to benefit from associated deductions under section 54F of the Income Tax Act.
Post-2022 Transactions: Flat Tax Rate
After April 1, 2022, the Indian government implemented a flat 30% tax rate on profits from cryptocurrency transactions, regardless of the holding period. This rate applied uniformly, with no deductions permitted for expenses or transaction fees.
Implication for Cryptocurrency Investors
This ruling has provided much needed clarity to the cryptocurrency investors particularly for transactions that were conducted before April 2022 regulations. Investors have to maintain a detailed records of their cryptocurrency transactions, including purchases and sale dates to ensure accurate tax reporting and compliance with the tax laws.
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