Eligibility Expenditure for acquisition of Bitcoin
Categories: Bitcoin
The proposed provisions specifically states that any deduction in respect of expenditure (other than cost of acquisition) incurred by the assessee in relation to such digital assets will not be allowed while computing the gains from transfer of such assets. In simple terms, only the cost of acquiring the digital assets i.e. Bitcoin will be allowed as a deduction.
In case a person obtains a Bitcoin by way of mining, the same may be treated as self-generated capital assets. However, the provisions of Section 55 of the IT Act, which provides for computation of cost of acquisition of self-generated assets does not specifically provide for such a computational method for cryptocurrency.
Also, if a person obtains a Bitcoin as a gift, the recipient of the Bitcoin will be liable to tax in India and accordingly the definition of “property” under Section 56(2)(x) has been revised to include virtual digital assets within its ambit. The provision further restricts the taxpayer or the investor to set off the loss from transfer of virtual digital assets against any other income.