Mumbai: Can an investor set off gains from Bitcoins against losses from trading unregulated commodities or stocks intraday while computing income tax liabilities for the year?Most tax experts seem to think so. Several investors have reached out to the income tax department and are now planning to define their gains or losses from Bitcoins as speculative business income. They would then set it off against losses or gains incurred from other speculative businesses to reduce or square off their tax liabilities.ET was the first to report last month that mega bitcoin gains for investors could attract about 30% tax. Soon after, the income tax department launched searches on top Bitcoin exchanges, including Zebpay, Unocoin and CoinSecure on December 13.The income tax department has issued about 5 lakh notices to Bitcoin and cryptocurrency investors and sought answers to 28 pointed questions. ET spoke to Bitcoin investors, tax officials and advisors helping investors. Many of these investors are planning to use their other speculative businesses to reduce the tax burden.“Transactions in cryptocurrencies are not settled by any physical delivery of an underlying asset . So, the profit/loss incurred due to trading in cryptocurrencies could be treated as speculation business income,” said Dilip Lakhani, a senior chartered accountant and tax expert.A Surat-based investor, for instance, now holds 4.4 bitcoins purchased on Indian exchanges at an average price of $15,000. The investor is filing a reply to the income tax department stating that he has made a loss of about Rs 5 lakh when he sold the Bitcoins in December. And he wants to set this loss against Rs 25 lakh he had earned through grey-market commodity trading.Tax experts point out that such a set-off may be allowed as trading in Bitcoins and gains in the commodities grey market could be defined as speculative business income.“As per the Income Tax Act, legality or illegality of income may not be of any consequence for paying tax. So, speculative business income from one asset can theoretically be set off against losses made in any other asset,” a senior official in the know told ET.“The loss on trading in cryptocurrencies will be treated as speculation loss and cannot be adjusted against any other source of income except speculation income. The loss can be equated with Dabba trading in securities, where the settlement is done without a physical delivery,” said Lakhani.According to current regulations, taxation on speculative business income is about 30%. If any tax-payer regularly deals in a speculative asset— buys and sells it regularly to gain profit—tax officials can take that as speculative business. While not all speculative businesses may be strictly legal, income tax can only report these transactions to other investigating authorities, like the police or enforcement directorate Taxability on Bitcoins has become one of the biggest issues for investors as they will have to pay income tax for the current financial year. Experts said returns from bitcoins could attract 20-30% tax, depending on whether they are categorised as business income or capital gains.“The income tax department may consider trading of Bitcoins/other crypto currencies as capital gains or speculative income. Speculative business income would attract about 30% tax. Such speculative loss from Bitcoin or any other crypto currency cannot be adjusted against non-speculative income but can be adjusted against gains in other speculative assets,” said Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP.Tax experts point out that for setting off speculative business income with losses, one condition must be met. That is the tax payer must show that it’s their routine business and not one of gains. So, only those investors who regularly trade in Bitcoins or other cryptocurrencies may be able to avail of the opportunity.Insiders point out that most of the investors in cryptocurrencies are regular traders.“Many of those who have received tax notices are diamond, textile and commodity traders. Many of these traders were regularly settling their dues in Bitcoins or any other cryptocurrency,” said a tax expert advising a Bitcoin investor.In some cases, say insiders, some investors have also rushed to buy Bitcoins in the last one month. This is mainly because they wish to set off their gains from speculative businesses like commodity trading or day trading against losses from Bitcoins.