RBI bans Bitcoin and other virtual currencies, investors concerned for tax dues

A day after the Reserve Bank of India (RBI) barred banks from dealing in cryptocurrencies, investors rushed to square off positions and sought advice on how much tax they should pay on returns made in FY18 and if they can do so before the July-end deadline.

The worry is that they may be left holding the virtual currency if they don’t sell it now and transfer the money into their bank accounts. They also fear a crackdown by tax authorities and other government agencies, experts said.

Bitcoin exchanges such as Zebpay and CoinSecure saw a spike in transaction volumes of about 40%, with about 90% of that being on the sell side, sources said.

Bank Of India2.00 (1.80%)

Respondong to an email query, a spokesperson for CoinSecure said, “Yes, there has been some amount of panic selling. We’ve seen a 4x increase in our volumes since yesterday.”

Investors aren’t sure about the quantum of tax they should pay.

Some tax experts said returns from cryptocurrencies such as Bitcoin could attract 20-30% tax, depending on whether they are categorised as business income or capital gains.
Some advisers are telling clients to pay the maximum 30%, hoping that this may protect them from the attentions of government agencies such as the Enforcement Directorate, insiders said

“The income-tax department may consider trading of Bitcoins and other cryptocurrencies as capital gains or speculative income,” said Amit Maheshwari, partner, Ashok Maheshwary &Associates LLP.

3-month Deadline from RBI
“Speculative business income would attract about 30% tax,” he added. Tax experts said 20% long-term capital gains tax would be levied if cryptocurrencies were held for at least 36 months.