Cryptocurrencies are capital assets and any profits made on their sale prior to the 2022 rules laid down by the government should be considered capital gains and taxed accordingly, the Income Tax Appellate Tribunal (ITAT) has ruled.

The decision is significant as it recognises virtual digital assets as capital assets, said experts. "It not only recognises Bitcoin as a capital asset but also provides clarity on how such transactions should be treated for the period before the introduction of the formal VDA (virtual digital asset) regime in 2022," said Sandeep Jhunjhunwala, tax partner (M&A) at Nangia Andersen.

Any income from the sale or transfer of virtual digital assets from April 1, 2022, onwards is taxable at the rate of 30%, plus surcharge and cess, following the government's latest notification.