Former Infosys Techie Turns ₹5 Lakh Bitcoin Bet into ₹33 Lakh Tax Savings
An ex-Infosys employee recently made headlines for a significant tax victory. After a successful case at the Jodhpur Income Tax Appellate Tribunal (ITAT), Bitcoin was officially classified as a capital asset, resulting in a lower tax rate and a substantial exemption.
The case revolved around a Bengaluru-based taxpayer who initially invested â¹5 lakh in Bitcoin using funds from their Infosys salary in FY 2015-16. Five years later, in FY 2020-21, they sold the cryptocurrency for â¹6.69 crore and reinvested the gains in a residential property. Initially, the Income Tax Department argued for a 30% tax rate under the virtual digital asset (VDA) tax regime introduced in 2022.
However, the ITAT ruled in favor of the taxpayer, citing that the Bitcoin transaction took place before cryptocurrencies were classified as VDAs on April 1, 2022. Instead, Bitcoin was recognized as a capital asset, allowing for a reduced tax rate of 20% on long-term capital gains (LTCG).
The ITAT emphasized the taxpayer’s intention to hold the cryptocurrency for long-term gains, leading to a tax of â¹33.6 lakh on a net LTCG of â¹1.68 crore after deductions, including the â¹4.95 crore reinvested under Section 54F.
This ruling serves as a crucial precedent for cryptocurrency taxation in India. It highlights the importance of understanding the legal framework and timing of transactions for tax purposes. Transactions before April 1, 2022, are governed by the previous framework, allowing cryptocurrencies to be treated as capital assets, not VDAs.
