S Shridhar, an engineer working at an American IT company in Bengaluru, sold about 20 bitcoins on Friday following Reserve Bank of India warnings against trading in virtual currencies and a fall in its value, only to be told by his tax adviser that he could be in trouble.The 36-year-old engineer and his advisers are now trying to figure out whether his return from the trade — which Shridhar transferred to his bank account — will be taxed and by how much.Sridhar is one among a rising number of individuals in the country rushing to sell their bitcoin holdings even as there is no clarity on the tax implication on these investments.Experts said returns from bitcoins could attract 20-30% tax, depending on whether they are categorised as business income or capital gains.“In case anyone sells bitcoins, the gains would definitely attract taxation, depending on his intent to categorise the gains either as business income or capital gains,” said Jeenendra Bhandari, partner at tax advisory firm MGB. “There is no specific amendment to income tax law required to determine bitcoin taxability,” he said.Experts said the tax department could categorise money from selling bitcoins as business income. “Active trading could also make it liable to be treated as speculative business, attracting regular tax rates,” said Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP Chartered Accountants. Alternatively, revenue officers could levy long-term or short-term capital gains tax on bitcoin returns.“If anyone is selling bitcoins and the money comes in his bank account, this would attract either long-term capital gain tax or short-term capital gain tax, depending on the holding period,” Maheshwari said.Long-term capital gains tax at 20% would be levied if bitcoins were held for at least 36 months. In all other cases, short-term capital gains tax at 30% would be applicable, he said.According to exchanges and agents helping Indians buy and sell bitcoins, there has been a rush in the last few days to sell them, leading to a crash in the value of the digital currency used for online transactions but not authorised by any central bank or monetary authority.“For the past two to three days we have seen many Indians selling their bitcoins as most of them had bought these at.`50,000 to .`5 lakh levels and .`10 lakh is a psychological benchmark that many would have had,” said Saurabh Agarwal, cofounder of Ahmedabad-based bitcoin exchange Zebpay. “Due to this same reason, we have seen premiums going down as well.”Bitcoin was down by about 25% Sunday afternoon to $13,152, or about .`8.48 lakh, as per data from the CoinDesk Bitcoin Price Index. Many bitcoin experts expect prices to crash further in the coming weeks.One reason for that is a fresh warning issued by RBI on Wednesday reminding investors that it has not authorised any entity to deal in bitcoins and that any investor or trader dealing with virtual currencies “will be doing so at their own risk”.This was RBI’s third warning against bitcoins. The first came in 2013 and the second in February this year.Investors and experts including Warren Buffet and JP Morgan’s Jamie Dimon have warned that bitcoin is a bubble even as its value shot up to $16,000 early this month from $1,000 in January.With the advance tax deadline on December 15, bitcoin investors and their tax advisers are working out how to deal with returns on investments in the cryptocurrency There is also a fear that it may attract indirect tax, that is, goods and services tax (GST).While most tax experts said GST may not be levied, there is afear that some officers may insist on this going ahead.“There won’t be GST on buying bitcoins as it is like buying USD or pounds from a forex dealer,” said Bhandari of MGB. “But the transaction fee for purchase or sale of bitcoins or the underlying transaction for which it is used will be liable to GST.”Many tax advisers are asking their clients to desist from transferring money received in their wallets after selling bitcoins to their bank accounts. But this is just a temporary solution as the money will automatically be transferred after three months.Not everyone seems to be worried though. Agarwal of Zebpay said there is fresh demand for bitcoins. “Since Friday we are seeing a new set of buyers coming on the buy side as well,” he said.