Made earnings from Bitcoin? Pay 20 percent advance tax!

If you are an investor in cryptocurrency like bitcoin and have made earnings selling the virtual currency then you will have to pay 20 percent advance tax. This means paying tax immediately after the gains rather than waiting for the end of the fiscal year.

"At least 20 percent should be paid as advance tax on cryptocurrency earnings as long-term capital gains tax if the currency was held for more than two years," an IT official was quoted as saying to Business Standard.

This makes mandatory for investors, who earned from selling cryptocurrency after December 15, will need to pay advance tax by March 15. The short-term capital gains
tax of 30 percent will be levied if the currency was held for less than 2 years.

In almost two years, Indian cryptocurrency traders have spent over Rs 22,000 crore ($3.5 Bn). High net-worth individuals (HNI’s) from sectors such as real estate, jewellery, and young tech-savvy investors have been trading cryptocurrencies through several platforms.

However, despite its growth, central banks of many countries like China and Russia have warned against making investments in it. The Indian government and the RBI have time and again cautioned against making the investment in cryptocurrency and had compared virtual currency like Bitcoin with notorious Ponzi schemes.

Recently, the government has tightened the noose around cryptocurrency exchanges and has stopped registering cryptocurrency exchanges under the Companies Act, 2013.

Last week, the Income Tax (IT) department sent notices to about 5 lakh HNIs who were engaged in trading Bitcoin in December last year. The notices asked about capital gains made by cryptocurrency or bitcoin traders on a yearly basis with detail statement.

In the absence of definite regulation, some accounts of Bitcoin exchanges in the country were also suspended by banks including State Bank of India, Axis Bank, HDFC Bank, ICICI and Yes Bank.

Cryptocurrencies including bitcoin are the digital currency that can be used to buy products and services without the involvement of the intermediary. Last year, bitcoin price had increased by over a thousand per cent.

In India, digital sites such as Sapnaonline.com, Fashion Diva, Hira watch, e-paisa, e-Travelsmart, FlightShop accept bitoin. A school in Karnataka Dharwad International School also accepts payment in cryptocurrency. Globally, companies like Bloomberg.com, Microsoft, Wikipedia, Reddit, Expedia.com, KFC and Subway allow customers to spend cryptocurrency on their platforms.

Last month, cryptocurrency dealer Pluto Exchange announced the launch of the country’s first app-based wallet that enables bitcoin transactions using a mobile number.