In­vest­ment in bit­coin may be treated as cap­i­tal as­set

Mint Asia ST - - Views Otherviews - SONU IYER

I was an NRI living in Sin­ga­pore and I re­turned in Au­gust 2017. I have bit­coins worth Rs3.2 lakh that I had bought in Septem­ber 2016 for Rs35,000 in Sin­ga­pore. I am plan­ning to sell these. What will be my tax li­a­bil­ity? What will be my tax li­a­bil­ity? How should I file it?

—Shekhar Ma­ha­p­a­tra Typ­i­cally, source of in­come lies where the ser­vices are per­formed, or where the as­set from which the in­come arises is lo­cated. There is no clar­ity on si­tus of bit­coin for tax pur­poses. Res­i­den­tial sta­tus un­der the in­come-tax law is de­ter­mined based on your phys­i­cal pres­ence in In­dia in the cur­rent fi­nan­cial year (FY) (1st April to 31st March) and pre­ced­ing 10 FYS.

An in­di­vid­ual qual­i­fy­ing as ROR is tax­able on global in­come. An in­di­vid­ual qual­i­fy­ing as RNOR is tax­able on in­come sourced from or re­ceived in In­dia and in­come which is de­rived from a busi­ness con­trolled in or a pro­fes­sion set up in In­dia. An in­di­vid­ual qual­i­fy­ing as NR is tax­able only on in­come sourced from or re­ceived in In­dia. In­come from sale of bit­coins earned out­side In­dia and re­ceived out­side In­dia will not be tax­able in In­dia if you qual­ify as NR or an RNOR in In­dia. Sub­se­quent re­mit­tance of the said in­come will also not be tax­able in In­dia. But since the is­sue of si­tus of bit­coins is not a set­tled con­cept, there can be pos­si­ble lit­i­ga­tion with the tax au­thor­i­ties on this is­sue. In case you qual­ify as an ROR, the in­come from sale of bit­coins would be tax­able in In­dia.

In the ab­sence of spe­cific guide­lines by the in­come tax au­thor­i­ties in In­dia, bit­coins may be treated as a cap­i­tal as­set if they are pur­chased for the pur­pose of in­vest­ment. If they are ac­cepted as cap­i­tal as­sets, any gains aris­ing on sale will be con­sid­ered in­come un­der the head cap­i­tal gains. Gain or loss on sale of bit­coins will be cal­cu­lated first on each bit­coin trans­ac­tion, then on an ag­gre­gate ba­sis by com­bin­ing all gains and losses to pro­duce a net fig­ure. Gain or loss will be com­puted by tak­ing the sale price of each bit­coin and sub­tract­ing its cost. Bit­coins held for not more than 36 months will be con­sid­ered short-term cap­i­tal as­sets (STCG), and would be tax­able at your ap­pli­ca­ble slab rates plus sur­charge and ed­u­ca­tion cess. Long-term cap­i­tal gain (LTCG) is taxed at 20% plus ap­pli­ca­ble sur­charge and ed­u­ca­tion cess, with the ben­e­fit of in­dex­a­tion.

In case of dou­ble tax­a­tion, ap­pli­ca­ble ben­e­fit may be ex­plored as per the pro­vi­sions of Dou­ble Tax­a­tion Avoid­ance Agree­ment be­tween In­dia and Sin­ga­pore. Also, since le­gal sta­tus and tax­a­tion of bit­coins in In­dia has not fully evolved, ob­tain pro­fes­sional ad­vice be­fore fil­ing your tax re­turn.

Queries and views at mint­money@livemint.com

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