Bitcoin taxation case: An ex-Infosys employee recently won a case against the Income Tax department after the Jodhpur income tax appellate tribunal (ITAT) decided that the cryptocurrency (Bitcoin) sold by the person was a capital asset. The ITAT also ruled that the Bitcoin investment was funded from the person’s Infosys’ salary income.
The ITAT stated that the person should be allowed to pay a lower tax rate (20%) on his profit from the sale, and claim ₹4.95 crore as income tax exemption under section 54 F.
Consequently, the individual taxpayer paid a lower tax of ₹33 lakh ( ₹33,60,485) on the gains from the sale. The Infosys employee bought the Bitcoin for ₹5 lakh, and sold it for ₹6.69 crore.
Although the ex-Infosys employee had already lost the case against the Income Tax department at National Faceless Appeal Centre (NFAC) Delhi, the Jodhpur ITAT allowed the person to file an appeal once again.
‘Intention appears to be to hold long-term capital gains’
The Jodhpur ITAT came to the conclusion that the ex-Infosys employee was not regularly engaged in purchasing or selling shares of cryptocurrency. “He is not regularly engaged in the purchase or sale of shares or cryptocurrency. His intention appears to be to hold for long-term capital gains, which is further supported by the fact that he made an investment in cryptocurrency during FY 2015-16, which was sold in FY 2020-21,” noted Jodhpur ITAT.
“The gain from the sale of cryptocurrency was then reinvested in the purchase of a house. This demonstrates that the assessee’s intention in investing in cryptocurrency was to hold it and earn long-term capital gains,” stated the Jodhpur ITAT, as per reports.
The Jodhpur ITAT ruled that cryptocurrencies such as Bitcoin and Ethereum are considered capital assets, meaning that profits from their sale are classified as capital gains rather than income from other sources. This ruling applies to transactions conducted before April 1, 2022, when the government introduced specific tax regulations for cryptocurrencies.
