Taxation of Bitcoin in India
Even though India has not specified its stand on the legality of investment in Bitcoin, the recently announced Budget 2022 vide Finance Bill 2022 proposes to introduce a framework for taxation of virtual digital assets. Once, the Finance Bill is ratified into an Act, the said framework would be made effective for Financial Year 2022-2023 onwards.
The taxation as per the Budget 2022 proposal would be taxation of gains at the rate 30% on transfer of Bitcoin.
The Government has proposed to introduce a new section 115BBH in the Income Tax Act, 1961 (‘the IT Act’) for taxation of income from transfer of virtual digital assets. In accordance with the said section, where the total income includes any income from transfer of any virtual digital assets, the said income would be subjected to a tax rate of 30% and such rate would be enhanced by an applicable surcharge rate, if any, and a health and education cess.
As per Section 2 (47) of the IT Act, virtual digital assets would mean any information, code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme and can be transferred, stored or traded electronically. Thus, the definition of virtual digital assets is quite wide so as to include all forms of cryptocurrencies including Bitcoin.