The Income Tax Appellate Tribunal (ITAT) ruled that Bitcoin qualifies as a capital asset.
Case Background:
🔹 Raunaq Prakash Jain bought Bitcoin worth $6,478 (₹5.05 lakh) in 2015-16 and sold it for $78,8063.84 (₹6.69 crore) in 2020-21.
🔹 He declared the profits as long-term capital gains and claimed a deduction under Section 54F for buying a house.
Tax Authority’s View:
🔹 The Income Tax Officer (AO) did not consider Bitcoin a capital asset under Section 2(14) because it wasn’t explicitly defined at that time.
🔹 The AO taxed the gains as “Income from Other Sources”, denying the long-term capital gain treatment and the Section 54F deduction.
Tribunal’s Decision:
🔹 The Income Tax Appellate Tribunal (ITAT) ruled in favor of the taxpayer.
🔹 It held that Bitcoin qualifies as a capital asset, even before the Virtual Digital Asset (VDA) regime was introduced in 2022.
🔹 Gains from the sale of Bitcoin should be taxed as long-term capital gains because:
⦿ Bitcoin represents a property or right under Section 2(14).
⦿ The holding period exceeded 36 months, qualifying for long-term gains.
🔹 Deductions under Section 54F are valid.
Why It Matters:
🔹 Before 2022, crypto taxation was unclear.
This ruling ensures fair tax treatment for long-term holders of Bitcoin/crypto.
🔹 Pre-2022 gains can now be taxed as Capital Gains, not “Other Income.”
🔹 This landmark decision clarifies crypto tax treatment for the years before April 2022, when India introduced the 30% flat tax on VDAs.