A former Infosys employee successfully challenged the Income Tax Department in the Jodhpur Income Tax Appellate Tribunal (ITAT), securing a favorable ruling that classified Bitcoin as a capital asset.
The case revolved around the tax treatment of ₹6.69 crore in profits made from Bitcoin sales. The taxpayer had invested ₹5 lakh in Bitcoin during FY 2015-16 and sold it in FY 2020-21, reinvesting the gains to purchase a house. The Income Tax Department argued that the gains should be taxed at 30% under the virtual digital asset (VDA) tax regime introduced in 2022. However, the ITAT ruled in favor of the taxpayer, recognizing Bitcoin as a capital asset since the transaction occurred before April 1, 2022, when cryptocurrencies were not classified as VDAs.
The ITAT issued its ruling in December 2024, addressing Bitcoin transactions conducted before the introduction of the VDA tax regime.
The case was adjudicated by the Jodhpur Income Tax Appellate Tribunal in India, with the taxpayer residing in Bengaluru at the time of the transactions.
The ruling clarified that Bitcoin transactions before April 2022 should be taxed under the pre-existing framework. The tribunal taxed the gains as long-term capital gains (LTCG) at a lower rate of 20%, rather than the 30% applicable to VDAs. Additionally, the tribunal allowed a ₹4.95 crore exemption under Section 54F of the Income Tax Act, as the gains were reinvested in residential property.
By treating Bitcoin as a capital asset, the tribunal enabled the taxpayer to reduce their tax liability to ₹33.6 lakh on net LTCG of ₹1.68 crore after deductions. The ITAT emphasized that the assessee’s intention was to hold Bitcoin as a long-term investment for capital gains.
This landmark decision provides clarity on cryptocurrency taxation in India, particularly for transactions conducted before April 2022. Tax experts believe it sets an important precedent, especially for taxpayers who reinvest crypto gains into residential properties under Section 54F.
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