Even as a government committee is
debating the issue of Bitcoin ( to be or not to be ? ) and even as RBI keeps
issuing warnings to the public re the “ Illegal Status “ of the Bitcoin, here is a way to burst
the Bitcoin Bubble
A news appearing in
today’s Economic Times , reads :
S Shridhar, an engineer working at
an American IT company in Bengaluru, sold about 20 bitcoins on Friday following
Reserve Bank of India warnings
against trading in virtual currencies and a fall in its value, only to
be told by his tax adviser that he could be in trouble.
The 36-year-old engineer and his advisers are now trying to figure out whether his return from the trade — which Shridhar transferred to his bank account — will be taxed and by how much.
Sridhar is one among a rising number of individuals in the country rushing to sell their bitcoin holdings even as there is no clarity on the tax implication on these investments.
Experts said returns from bitcoins could attract 20-30% tax, depending on whether they are categorised as business income or capital gains.
"In case anyone sells
bitcoins, the gains would
definitely attract taxation, depending on his intent to categorise the
gains either as business income or capital gains," said Jeenendra
Bhandari, partner at tax advisory firm MGB.
"There is no specific
amendment to income tax law required to determine bitcoin taxability," he
said.
Experts said the tax department
could categorise money from selling bitcoins as business income.
"Active trading could also
make it liable to be treated as speculative business, attracting regular tax rates," said
Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP Chartered
Accountants.
Alternatively, revenue officers
could levy long-term or
short-term capital gains tax on bitcoin returns.
"If anyone is selling
bitcoins and the money comes in his bank account, this would attract either long-term capital gain tax
or short-term capital gain
tax, depending on the holding period," Maheshwari said.
Long-term capital gains tax at 20% would be levied if bitcoins were held for at least 36 months. In all other cases, short-term capital gains tax at 30% would be applicable, he said.
According to exchanges and agents helping Indians buy and sell bitcoins, there has been a rush in the last few days to sell them, leading to a crash in the value of the digital currency used for online transactions but not authorised by any central bank or monetary authority.
One reason for that is a fresh warning issued by RBI on Wednesday reminding investors that it has not authorised any entity to deal in bitcoins and that any investor or trader dealing with virtual currencies "will be doing so at their own risk".
With the advance tax deadline on December 15, bitcoin investors and
their tax advisers are working out how to deal with returns on investments in the crypto-currency.
There is also a fear that it may attract indirect tax, that is, goods and services tax (GST).
While most tax experts said GST may not be levied, there is a fear that some officers may insist on this going ahead.
"There won't be GST on buying bitcoins as
it is like buying USD or pounds from a forex dealer," said Bhandari of
MGB. "But the transaction fee for purchase or sale of bitcoins or the
underlying transaction for which it is used will be liable to GST."
Many
tax advisers are asking their clients to desist from transferring money received in
their wallets after selling bitcoins to their bank accounts.
But
this is just a temporary solution as the money will automatically be transferred after three
months.
MY SUGGESTION :
I hope , no IT officer , in his enthusiasm , sends
tax payment notice to persons who have deposited their sale-proceeds ( from
selling of Bitcoins ) in their bank accounts
Sending a
tax notice, could amount to “ legitimizing “ the Bitcoin !
Levying a GST ( even at 50 % ) , would confer
legitimacy to Bitcoin !
On the contrary , since RBI has declared Bitcoin as
“ Illegal “ , that entire
sale-proceed must also be treated as “ Illegal “ – and CONFISCATED !
That should burst the Bitcoin Bubble !
11
Dec 2017
www.hemenparekh.in / blogs
No comments:
Post a Comment