The Income Tax Appellate Tribunal (ITAT) in Jodhpur, India, today clarified the taxation of crypto transactions made before the financial year (FY) 2022-2023. According to the decision, the profit from all such sales will be considered capital gains.
ITAT Gives Clarity on Crypto Tax before 2022
In what is considered a landmark decision for India’s digital asset ecosystem, the ITAT declared that cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and others, were primary assets before April 1, 2022. As a result , or any profit received from its sale during the day. that period should be classified as gross profit over income from other sources.
For those who don’t know, India’s current virtual assets tax framework came into force on 1 April 2022, as part of the Virtual Digital Assets (VDA) laws. These laws impose a flat tax rate of 30% on all crypto gains without allowing taxpayers to deduct losses against gains. Additionally, 1% tax deducted at source (TDS) is charged on all crypto transactions.
However, the ITAT decision provides relief to Indian cryptocurrency startups, as they will be subject to a lower tax rate than the 30% minimum rate imposed under the current framework. In particular, before 1 April 2022, short-term gains were taxed at 15%, while long-term gains were taxed at 10%.
The ITAT decision came while hearing a case involving a person who had bought BTC worth $6,478 in FY 2015-16 and sold it for $78,803 in FY 2020-21. The person said that the proceeds from the sale should be taxed as long-term gains since the property was held for more than three years. However, the assessing tax officer disagreed, arguing that digital assets, which have no intrinsic value, could not be classified as assets.
In contrast, the ITAT rejected the contention of the tax authority, stating that under Section 2(14) of the Income Tax Act, cryptocurrency qualifies as an asset. The court clarified that “property of any kind held by a trustee,” including a right or claim to property, satisfies the definition of capital property.
India’s Regulatory Gap on Digital Goods
Despite boasting very high The rate of crypto adoption around the world, India continues to lag behind in creating a supportive regulatory framework for digital assets. As a result, many virtual goods businesses have moved their headquarters to crypto-friendly places like the UAE or Singapore.
India’s high tax regime – 30% on profits and 1% TDS on transactions – has been a frequent target of criticism. Last year, he was the CEO of WazirX digital asset exchange predicted that the current tax structure will remain in place for at least two more years before any significant revisions.
Government of India consideration consulting with industry experts to shape a balanced regulatory framework for cryptocurrencies. BTC is trading at $108,248 at press time, up 2.5% in the last 24 hours.
Featured image from Unsplash.com, Chart from TradingView.com
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