Despite RBI warning against the trading bitcoins and threatening to impose anti-money laundering and terrorism laws, the transaction of bitcoins in India is at an all-time high. Even the financial experts are not being able to predict its behaviour.
 
Many Indians are rushing to sell their bitcoins as there is no clarity on the tax implication on these investments. The very basic legal status of bitcoins is ambiguous and changes every fortnight, it is indeed interesting to know how bitcoin traders are dealing with the tax issues.
 
An Economic Times report said that depending on whether they are categorised as business income or capital gains, returns from bitcoins could attract 20-30% tax.
 
However, moneycontrol report said that long-term capital gains tax at 20 percent would be levied if bitcoins were held for at least 36 months. In all other cases, short-term capital gains tax at 30 percent would be applicable, the report said.
 
According to the report, with the advance tax deadline on 15 December, bitcoin investors and their tax advisers are working out how to deal with returns on investments in the cryptocurrency.
 
There is also a fear that it may attract indirect tax, that is, goods and services tax (GST).
 
The selling trend was preceded by a third warning from the Reserve Bank of India (RBI), which last week cautioned investors for the third time saying the central bank had not authorised anyone to trade in bitcoins and thus, such investors were at their own risks.
 
Filing profit or losses from trading in bitcoins could become complicated in income tax returns as cryptocurrencies are not yet regulated and recognised in India.
 
The bitcoin investors and tax consultants are trying to figure out about ways of dealing with the returns on cryptocurrencies.