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Crypto classified as capital assets
The ITAT’s judgment recognises cryptocurrencies as capital assets, meaning any gains made from their sale before the 2022 regulations should be taxed as capital gains, not as income from other sources.
This distinction is crucial because capital gains tax typically offers more favorable tax rates than income tax.
Impact on long-term holdings
The ruling offers a key benefit for investors who held crypto assets for over three years. Such investors can now benefit from long-term capital gains (LTCG) tax rates, which usually result in lower tax liabilities.
This is a significant relief for individuals who sold cryptocurrencies before 2022, as their profits will be taxed more favorably under the capital gains framework.
Case details and tribunal’s verdict
The case involved an individual who purchased cryptocurrencies worth ₹5.05 lakh in 2015-16 and sold them for ₹6.69 crore in 2020-21. The taxpayer argued that the profits should be treated as capital gains, given the lack of specific crypto taxation rules before 2022.
The ITAT agreed, stating that cryptocurrency, like traditional assets such as stocks and real estate, qualifies as a capital asset.
The bench, comprising S Seethalakshmi and Rathod Kamlesh Jayantbhai, directed that LTCG benefits be applied, as the assets were held for more than three years.
The assessment officer was instructed to grant the applicable deductions under the law.
Edul Patel, Co-founder and CEO of Mudrex, welcomed the ruling, stating: “This decision brings much-needed clarity to the crypto market in India. By recognising crypto as capital assets, it aligns its taxation with traditional investments like stocks, offering relief to investors who sold crypto before 2022.”
