When did cryptocurrencies become popular in India?
Cryptocurrency in India became more popular post demonetization in November 2016.
India in the past was known to consider the conservative approach whenever something different is introduced. However, since the past decade, acceptance of newer technology has been swift. Maybe rise in literacy and demographics of the country (approximately 75% of the population below the age of 30 years) is responsible for such greater level of acceptance.
Same is the case of cryptocurrency in India.
Post demonetization, leading cryptocurrency trading exchanges in India have witnessed a very significant rise in the Indian user base, which is still growing considerably even today.
However, many Indian investors, traders and speculators alike will have the following question in their head.
“How can I treat the returns/income on the sale of cryptocurrency in India for Income Tax purpose?”
Investors with www.tradescrypt.com asked this question often since they have generated extremely good returns on their investments in fundamentally sound cryptocurrencies over the medium term period.
Since the Central Board of Direct Taxes has not issued very specific guidelines yet, therefore this question had to be answered appropriately by digging deep as although cryptocurrencies in India are NOT ILLEGAL, they are not yet regulated.
Therefore, in the present situation, cryptocurrency in India could be treated as capital assets with the sale resulting in a capital gain, as in the US. If the individual/entity is in the business of trading in cryptocurrencies, in such cases the income can be treated as business income. In addition, we have witnessed cases where individuals have preferred to treat the income from cryptocurrencies as ‘income from other sources’, in such cases relevant Income Tax slab rate applies.
Cryptocurrency investors should note that if their asset holding period is more than 36 months (as in the case of any property), then the investor is liable to pay Long Term Capital Gains (LTCG) which attract a tax rate of 20%. If the asset holding period is less than 36 months, then the investor will have to pay Short Term Capital Gains (STCG).
Now, if the transactions in cryptocurrency are substantial and frequent, then it could be assumed the individual is trading in cryptocurrencies and the income on sale will be considered business income, hence the applicable income tax slab rate will be deducted.
This brings us to another equally important question.
When will there be clarity on cryptocurrency in India?
On 08.08.2017, the government of India has reportedly completed work on a proposal that outlines steps to regularize cryptocurrency in India and it seems a tax policy will be established for cryptocurrencies in order to reduce this ambiguity.