The rage behind Bitcoin, driven by its skyrocketing value that continues its record-breaking spree, saw another step towards with its legitimization after the Chicago Board Options Exchange (CBOE) launched its first Bitcoin futures contracts on Sunday.
If there was ever a need for proof for the way this cryptocurrency has captured the people’s imagination, the CBOE website crashed just as it launched Bitcoin futures. CBOE attributed the downtime to significant traffic around the futures launch in a post on Twitter.
Interestingly, this coincided with a sudden surge in the price of bitcoin, which jumped from $14,509 to $15,732 during the same time that the futures contracts were launched, according to CoinDesk's Bitcoin Price Index (BPI).
The surge in Bitcoin’s popularity, or its value, has not left Indians untouched. This, despite the Reserve Bank of India issuing three warnings in four years to people taking fancy to this virtual currency.
While it is assumed that people opting to invest in Bitcoins are well aware of its potential as well as its pitfalls, this new development could throw an unexpected spinner.
The Economic Times reports that the RBI’s warnings have triggered a Bitcoin selling spree with several Indians rushing to sell their holdings.
The catch, however, is that there is still no tax clarity on the returns on investments that these people may have made.
Among the primary implications that these earnings could invite, believe experts, is a tax levy in the range of 20-30 per cent, depending on whether they are categorised as business income or capital gains.
"In case anyone sells bitcoins, the gains would definitely attract taxation, depending on his intent to categorise the gains either as business income or capital gains," Jeenendra Bhandari, partner at tax advisory firm MGB, told ET, adding that there was no specific amendment to income tax law required to determine bitcoin taxability.
The tax levy, say experts, could range from regular taxes –for active trading—or long-term or short-term capital gains tax on Bitcoin returns.
While tax experts expect levy of long-term capital gains tax at 20 per cent if Bitcoins were held for at least 36 months, short-term capital gains tax at 30 per cent would be applicable for all other cases.
On Wednesday, the RBI reminded investors that it has not authorised any entity to deal in bitcoins and that any investor or trader dealing with virtual currencies "will be doing so at their own risk".
Bitcoin was down by about 25 per cent on Sunday afternoon to $13,152, as per data from CoinDesk. Many Bitcoin experts expect prices to crash further in the coming weeks, which could trigger another selling spree.
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