• Notification Date: 19-12-2024
  • Notification No: N/A

ITAT Ruling:Cryptocurrencies Now Recognized as Capital Assets for Taxation in India

In a landmark decision, the Income Tax Appellate Tribunal (ITAT) in Jodhpur has clarified that cryptocurrencies are to be treated as capital assets for the purposes of tax. This ruling provides much-needed clarity on the way profits from cryptocurrency sales will be taxed, specifically for transactions that occurred before the government introduced specific rules for Virtual Digital Assets (VDAs) in 2022.

The case involved an investor who bought cryptocurrencies worth Rs 5.05 lakh in 2015-16 and sold them for a huge Rs 6.69 crore in 2020-21. Since the investor held the assets for over three years, the ITAT ruled that the profits should be treated as long-term capital gains, which come with lower tax rates as compared to short-term gains.

This ruling is significant because, before it, there was unpredictability about whether profits from cryptocurrency sales should be classified as "capital gains" or "income from other sources." With this decision, it is now quite clear that profits from crypto sales will be taxed as capital gains.

Implications for Crypto Investors:

  • Pre-2022 Sales: Profits from crypto sold before the 2022 tax rules of the government will be treated as capital gains, and investors may qualify for deductions that are available for long-term investments.
  • Post-2022 Sales: Since April 2022, the profits from crypto sales are taxed at a flat rate of 30%, regardless of whether they are short-term or long-term.

This ruling is a step towards bringing transparency to the developing crypto ecosystem in India. It also signals the requirement for investors to keep detailed records of their transactions, as the treatment of tax depends on the timing of sales.

Experts see this as a notable milestone in the development of a more structured and fair framework of tax for cryptocurrencies in India.