ITAT India Rules Crypto as Capital Assets for Taxation

In a major ruling, the Income Tax Appellate Tribunal (ITAT) has clarified that cryptocurrencies, including Bitcoin and Ethereum, will be treated as capital assets for taxation in India.

This decision is a game-changer for crypto investors, offering clear guidance on how profits from crypto sales should be taxed, particularly for transactions that occurred before 2022, reported by CNBC .

The ITAT’s ruling establishes that profits from cryptocurrency sales will be classified as capital gains, not income from other sources. This means that profits made from selling crypto before 2022 will be taxed at capital gains rates, which are usually lower than income tax rates. 

For those who held crypto for over three years, the profits will qualify as long-term capital gains, further reducing tax liabilities. For example, if an investor bought Bitcoin in 2015 for Rs 5.05 lakh and sold it for Rs 6.69 crore in 2020, the profit would be considered long-term capital gain and taxed at a lower rate. 

However, the rules changed after April 2022. Any crypto profit made after this date is taxed at a flat 30% rate, regardless of whether it’s a long-term or short-term gain.

This ruling brings much-needed clarity for crypto investors, who now know how to handle taxes on their profits. Investors must maintain detailed records of all transactions to ensure accurate tax filing.

This decision is crucial for both current and future crypto investors, simplifying the tax landscape for virtual digital assets in India.