Note: Crypto currency trading in india is still unregulated and hence there are no clear rules around taxation of these currencies in India. Information below is based on our understanding of the law and should not be considered as financial advice. We recommend you consult your CA for more details.

Taxation of crypto currencies depends on the source of bitcoin generation. There are actually 3 ways in which you can earn bitcoin & the taxation differs from one to another:

  1. Mining them
  2. Purchasing them from bitcoin exchange for real money
  3. Receiving them in return for sale of goods or services


The taxation for the bitcoins earned through the above methods is as follows

  1. Bitcoins earned through mining - No tax (This may change in the near future. Check this out for detailed information)
  2. Bitcoins purchased from bitcoin exchange
    1. Bitcoins held as investment being transferred in exchange for real currency are taxed under long term / short term depending on the holding period
      1. Long term(>3 years) - Flat 20% tax
      2. Short term(< 3 years) - Taxed according to your individual tax slab rate ((Applicable on your income))
    2. Bitcoins held as stock-in-trade being transferred in exchange for real currency are
      1. Taxed as profit from business according to your individual tax slab rate (Applicable on your income)
  3. Bitcoins received in return for sale of goods or services - Taxed as profit from business according to your individual tax slab rate (Applicable on your income)


For more details we recommend reading what our friends at cleartax have shared.