Cryptocurrency Tax Advisor | CA in Mumbai | Chartered Accountant

2021 (88)

We are Chartered Accountants in Mumbai - We are a professionally managed firm providing best quality services to clients in Mumbai. The Mission of our Firm is to provide clients with a One Stop Solution for all Business, Financial and Compliance needs. Our firm’s focus on Honesty, Integrity & Excellence has created immense value & wealth for our clients. We are the leading crypto tax consultants in India. We are rated as best CA in Mumbai by our clients. We prefer to take a proactive vs. reactive approach to tax services. By keeping current on new tax laws and legislation, we are in a position to identify key tax planning opportunities that minimize both current and future tax liabilities. We provide our individual and business clients with the taxation expertise and knowledge that they deserve throughout the year. Our services incorporate all of the following: Individuals Corporations Partnerships LLPs Estates, trusts & gifts Not-for-profit organizations Tax effects of buying/selling a Property We serve individuals and owners of small businesses in the Greater Mumbai area, including Mahavir Nagar, Charkop, Gorai, Borivali West and East, Kandivali West and East, Malad, Goregaon, Andheri, Bandra, Dadar, Lower Parel, Thane, Mulund, Ghatkopar & Churgate. We are specialists in following Areas: **Crypto Tax Advisory** - Maintaining and updating crypto holdings/portfolio - Advice on possible tax efficiencies - Maintaining robust documentation - Computation of tax liabilities and Compliance **Crypto Tax Compliances** - Ascertaining type of ITR (Income Tax Return) applicable - Accurately reporting different crypto incomes - Verification and uploading of Income Tax Return assesment **Crypto Tax Assessment** - Responding to notices issued by the Income Tax Department - Representing clients during Income Tax hearings - Negotiation and assistance in completion of assessment **Income Tax Advisor :** Income Tax Planning, GST Registration, GST Returns, etc Top Mumbai Accounting Firm : Book Keeping, Auditing, etc Tax Preparation Service : Income Tax Returns, IT Appeals, TDS, etc Financial Advisor : Financial Planning, Wealth Creation & Investment advisory Our firm is adept at executing multi-location work for its clients which span across various locations. The firm caters to Individuals & Corporates and supports them in their growth. Our CORE focus of Accounting, Taxation and Financial Advisory with effective execution strategies, form an integral part of our practice. We provide these services to Individuals as well as Corporates.

Bitcoin Taxation in India

  • Reserve Bank of India has requested its own controlled entities (such as banks) to avoid offering services to individuals or business entities engaged in cash cryptocurrencies (INRs) up and down routes. This restricts the purchase/selling of INR cryptocurrencies via banks. Despite all the weaknesses, India represents one of the largest nations in the world, taking into account the share of currency kept (though not actually traded), which is 44% of the world’s share. Given the uncertainty surrounding Bitcoin and the fairly developing state of its growth, one thing is for sure-Bitcoin will take time to be widely accepted as a currency or a medium of payment in India.
  • This will contribute to the usual reaction of this ex-change shifting base outside India, and the subsequent loss of big potential tax revenues. The handling of bitcoins would be perfect if the government were to legalize the trade of these currencies. Currencies should be viewed as current assets, and GST should be paid at the margins that bitcoin exchanges charge their users. This would ensure that currency trade is limited, as well as the addition of tax Income to the government of India.
  • In the Budget Speech of Finance Minister, Mr. Arun Jaitley, said in his 2018 budget, He said that “Blockchain technology or Distributed ledger system enables the Firms of any chain of records or transactions without the need for intermediaries. The Govt of India does not consider cryptocurrencies to be a coin or legal tender and will take all steps to eliminate the usage of such crypto assets in the funding of illegal activities or as part of the payment system.
  • The Centre Govt will possibly explore the use of blockchain technology to usher in the digital economy.” Further, the RBI has also chosen to reiterate its earlier message to ‘users, holders and traders of Virtual Currency (‘VCs’)/ CryptoCurrencies like bitcoins regarding financial, operational, legal, potentially global, consumer protection and security risks associated with dealing with such risks.
  • Although this article is aimed at addressing the taxability of Bitcoins only, the tax treatment of transactions with other cryptocurrencies will also be similar to that of cryptocurrencies /Bitcoins.

Global Bitcoin Situation

The bitcoin industry differs significantly from country to country.

  • The United States of America considers Bitcoin to be a commodity that can be a fixed asset or an inventory asset.
  • On the other hand, the UK considers it to be a ‘private currency.’
  • Australia has a case-by-case approach to Bitcoins, spanning from traded products to investment, with different care for related mining or exchange facilitation services.
  • Singapore considered Bitcoin to be a legal normal currency in its country,
  • Japan considered Bitcoin to be commodities.

What are the different situations/ Scenario of CryptoCurrencies taxed in India?

The theory of CryptoCurrencies being really new to the Indian economy, obviously, the government has not yet introduced the taxability of bitcoins into the books of the law. At the present time, the tax levy on bitcoins cannot be excluded out since the Indian income tax regime has always tried to tax income earned regardless of the form in how it is received.

The prospect of a tax on bitcoins can therefore be recognized in the following four situations:

Situation 1: Income from Bitcoin Mining

  • Bitcoins created by mining are self-generated capital assets. Later selling of such bitcoins will, in the normal course of business, give rise to capital gains. Even then, one should note that the acquisition cost of a bitcoin can not be calculated since it is a self-generated asset. Moreover, it does not fall within the meaning of the provisions of Section 55 of the Income Tax Act, 1961, which specifically addresses the cost of acquiring such self-generated assets.
  • The capital gains computation process is still not in operation following the judgment of the Supreme Court in the case of CIT v. B.C. Srinivasa Shetty (1981). The Hon’ble Supreme Court as well as various High Courts of the country had held that taxation on capital gain was not chargeable where the cost of acquisition was not ascertainable or nil. i.e No Gain in case of Nil cost of acquisition. Such issues were covered by various No of decisions Court of the country. Thus, No Capital Gain Tax will be levied on the mining of bitcoins.
  • This status will be preserved until such time as the government has decided to amend Section 55 of the Act. At this point in time, given that the Indian tax systems are completely silent on the taxability of bitcoins, we thought it right to elaborate on the possibly opposite view of the income tax authorities. There is a chance that bitcoins will not be considered by the government to be capital assets at all. Consequently, the provisions on capital gains will not occur at all. Consequently, the income tax authorities can choose whether to tax the value of bitcoins obtained from mining under the head “Income from other sources”

Situation 2: Bitcoins kept as a transfer of investment in exchange for real currency 

  • If bitcoins, which are capital assets, were retained as an investment and traded in exchange for actual cash, value appreciation will result in a long-term capital gain or short-term capital gain based on the holding duration of the bitcoin. In addition, long-term gains will be taxed at a flat rate of 20%, while short-term gains will be taxed at the individual slab rate. The purchase cost for the acquisition of long-term capital gains will be calculated after the indexation benefit has been awarded.
  • Understanding and appreciating the likely opposite point of view of the income tax authorities referred to in paragraph 1 above, the IT authorities do not consider Bitcoins as a capital asset and thus the capital gains provisions will not apply. The income tax authorities may therefore prefer to tax the earnings from bitcoins under the heading “Income from other sources.”
  • In addition, if the income is taxable under “Income from other sources,” the taxpayer will have to pay taxes at the rate applied to the tax leg from which the income is taxed. For example, if his taxable income exceeds Rs 10 lakh, he will be liable to a tax of at least 30 percent against a flat tax rate of 20 percent, which he would be responsible for paying if taxed on long-term capital gains. The advantage of indexation, as would be available if taxed on capital gains, would also not be accessible if taxed on income from other sources.

Situation 3: Bitcoins kept as a stock-in-trade transfer in exchange for real currency

  • Income from Bitcoins trading would give rise to business income and, as a consequence, income from such business would be subject to income tax as per personal slab rates.

Situation 4: Bitcoins gained as consideration for the selling of Goods & Services

  • Bitcoins obtained in this way shall be treated at the same time as receiving the money. It will represent income in the hands of the beneficiary. Moreover, since the recipient gained this income from a business or a profession, it will generally be taxed under the heading of gains or profits from a business or a profession.
  • As far as the disclosure requirement for Bitcoins in the income tax return forms is concerned, there is still a lack of clarity.

DIGITAL CURRENCY AND BLOCKCHAIN & LEGAL CONSULTATION SERVICES

We have global digital currency lawyers who can encourage companies, investors, and institutions to navigate the lawful complexities of digital currency and blockchain. We are committed to representing our clients tactically and aggressively in their transaction-based and lawsuits matters, whether ICO, IEO, Defi Project, organizers, Crypto Exchange, STO cryptocurrency suppliers, or investment firms associated in cryptocurrency projects, in order to address the complex legal issues presented by Blockchain technologies and online currencies.

Bitcoin Taxation in India | Cryptocurrency CA in Mumbai | Cryptocurrency Chartered Accountant in Mumbai | Tax Consultant for Cryptocurrency | Tax Advisor Cryptocurrency | Borivali | Kandivali | Malad

 

Your Guide to Bitcoin Taxation

With all the confusion on Cryptocurrency, This is your Guide to Bitcoin Taxation

Crypto Tax CA in Mumbai | Crypto Tax Chartered Accountant in Mumbai | Crypto Tax Consultant | Crypto Tax Advisor | Borivali | Kandivali | Malad

When you look at recent years, you will soon find that there has been a steady increase when it comes to the overall use of virtual currencies. This includes Dogecoin, Litecoin, Ethereum and Bitcoin. Crypto currencies are used not only as payment methods, but also as investment opportunities. Virtual currencies have also created a legal vacuum, which is now full to the brim with regulations. A lot of them revolve around tax and the way that cryptocurrency taxes are paid.

All About Bitcoin Tax

Bitcoin is the most prominent virtual currency. It’s important to know that it is a substitute for real currency and therefore holds the same value. You can change Bitcoin into Euro, Australian dollars, US dollars or another virtual currency. Usually any kind of cryptocurrency is traded online, anonymously. Bitcoin is unregulated as well, which means that it is not dependent on governmental backing or central banks. It’s important to know that Bitcoin has not obtained any kind of legal tender status in a lot of jurisdictions yet and certain tax authorities have noted its significance. If you want to find out more about Bitcoin tax, then take a look below.

The United States

The United States IRS service treats the currency, Bitcoin as being property as opposed to a currency. Any transactions that use Bitcoin will be taxed in the same way as property. This means that you need to report any Bitcoin transactions you do to the IRS so that they can be taxed. If you are a US taxpayer and you sell goods in exchange for Bitcoin currency, then you will be obliged to state the value of any Bitcoin you receive. You can file your crypto taxes in your annual tax return. The value of Bitcoin is based on the fair market value, on the date when the currency was received by the taxpayer. This would otherwise be the exchange data on the date of the receipt. If your virtual currency is an asset, such as stocks, bonds or any other type of investment property then it is your job as a taxpayer to take into account the taxable gains or losses. A taxable gain is when the USD market value in relation to Bitcoin is greater than the basis of the currency. A loss is when the market value is lower than the basis of the currency. If you happen to engage in Bitcoin mining or if you use your computer to validate transactions, then this will be subject to US taxation. If you find that the mining is successful, then the miner will need to include the fair market value and add it to your gross income. Wages that are paid in any kind of cryptocurrency, including Bitcoin are subject to tax withholding and social security. Taxpayers who do not comply may become subject to a range of penalties. For this reason, it’s vital that you take the time to understand the crypto tax in your area.

The EU

In the EU Bitcoin taxes are dependent on the country you are in. The purchase and sale of Bitcoin does not incur any VAT and Bitcoin transactions are in fact subject to other taxes as well. This can include income tax or capital gains. In the year 2015, the European Court of Justice ruled that any transactions that include Bitcoin are exempt from value-added tax. This is under the provision that it relates to currency, banknotes or coins, which are legal tender. According to the Court of Justice, Bitcoin is listed as being currency and it is not property. Nonetheless, many countries do tax Bitcoin with capital gains as well as income taxes.

The UK

In the UK, Bitcoin is a foreign currency. The tax rules that apply to losses and gains do in fact apply to transactions. Speculative transactions may not be subject to tax. HMRC do provide some vague information regarding the taxation and enforcement of Bitcoin transactions but they also say that each will be considered on the basis of circumstances and individual fact.

Germany

In Germany, Bitcoin has been considered as being private money since the year 2013. Although it is subject to 25% gains tax, this tax is only levied if the profits on the currency are acquired within a year of the receipt. This means that taxpayers who hold Bitcoin are not going to be subject to capital gains tax if they hold it for longer than a year. If this is the case, then their transaction will fall under the scope as being a private sale. The treatment of Bitcoin in Germany is very similar to shares and stocks.

Japan

In Japan, Bitcoin is known as being a payment method that is widely recognised. The sale of Bitcoin is completely exempt from consumption tax from 2017 and virtual currencies are asset-like values. This means that they can be transferred digitally. In the country of Japan, profits which are gained are considered as being business income and therefore are treated in accordance with capital gains for tax purposes. Source: Pexels (CC0 License)

Australia

In Australia, any transactions which use Bitcoin or any other type of virtual currency falls under the barter arrangement scope. AU tax authorities see Bitcoin as being an asset that can be used for capital gains. Businesses which conduct any kind of transaction by using Bitcoin should record and date the transaction, so that the value in AUD can be declared as being ordinary income. If Bitcoin transactions were being used for personal purposes then they would be exempt from taxation if any Bitcoin was used to buy goods or a service, which is for personal use or if the value is lower than AUD 10,000. It is important to note that if you held Bitcoin for investment purposes then you need to pay taxes on the gains. If you were to mine or exchange Bitcoin as a business, or for business purposes, then this would be considered as stock trading and would be taxed.

The World of Bitcoin Taxes

Different countries around the world view Bitcoin very differently and the tax you pay will largely depend on where you live, or where you are trading from. The EU consider Bitcoin to be a currency, but other jurisdictions, including Australia or even the US consider Bitcoin to be more of an asset or a property. If you want to find out how Bitcoin tax is calculated then the best thing that you can do is try and use an online tax calculator. When you do this, you can then simplify the whole process.

But how do I get my taxes sorted in India?

Fortunately we can help you sort out your Bitcoin taxes. Based on the categorisation of your transactions, we will help you calculate your crypto tax obligations and generate appropriate records based on your country requirements.

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA

CA in Mumbai | Chartered Accountant in Mumbai | Tax Consultant | Tax Advisor | Borivali | Kandivali | Malad

7 Crypto Tax Questions For Your CA Chartered Accountant

7 Crypto Tax Questions For Your CA Chartered Accountant

It doesn't matter whether you're a die-hard crypto trader or whether you occasionally dabble in crypto investing. If you've traded cryptocurrencies during the year, tax filing can get tricky. In case you've been under the impression that crypto transactions are anonymous and you don't really need to worry about paying taxes on them, you are wrong.

The India Income Tax Department had asked top crypto exchanges like WazirX, Coindcx, others for information on their India-based customers. What's more, they actually used this information to send out letters to suspected tax evaders. 

This is all to say that the India Income Tax Department is taking crypto taxation very seriously. So if you've been less than 100% when it comes to filing your crypto tax returns, this is the time to make up for it. If you're feeling overwhelmed and are not sure where to start, sit with your CA / Chartered Accountant and check whether they're up for the task of handling your crypto taxation. You can ask them these 7 questions to make sure they're up-to-date with the latest in crypto taxes and can help you sort out your crypto tax woes in time.

1. What kind of tax am I expected to pay on my cryptocurrency?

The India Income Tax Department treats cryptocurrency as property which means crypto transactions are treated in the same way as property transactions. To put it simply, if you sell crypto within one year of buying it, you will be subject to Short-term Capital Gains Tax (SCGT). If you wait for over a year, you will have to pay Long-term Capital Gains Tax (LCGT).

2. I have some transactions where I didn't sell my crypto for regular currency. I sold some Ethereum and bought bitcoin instead. Do I need to pay taxes for such a transaction?

This is a doubt that a lot of people have. If you didn't technically "sell" the cryptocurrency, do you still need to pay capital gains tax? However, the India Income Tax Department is quite clear about this. "Disposal" of any capital asset constitutes a taxable event. Disposal can mean a number of different things — from selling crypto to exchanging crypto for other cryptos, using crypto to purchase other goods, or even gifting crypto.

So how do you calculate your capital gains in this case? When it comes to crypto-to-crypto exchange, you need to keep accurate records of all your transactions. If you haven't done so yet, you can use crypto tax software to get your records in order. In this case, the fair market value of the crypto that you exchanged as on the date of the transaction will be the sales proceeds. You can then deduct the cost of purchase from the sales proceeds to calculate your capital gain.

3. Some part of my salary is paid to me in bitcoin. How do I report this income given that the price of crypto keeps fluctuating?

The salary you receive in crypto has to be added to your taxable income when it comes to calculating your taxes. The India Income Tax Department follows a fairly straightforward rule here — the fair market value of the bitcoin on the date that you received it is what will be added to your gross income. In this case, it's important for you to maintain accurate records as to when the cryptocurrency was credited to your account.

4. I am mining cryptocurrency. Do I have to pay self-employment tax? What expenses can I deduct when I report my taxable income?

The answer to this depends on the nature of mining. For instance, you might be mining bitcoin but as an employee working for someone else. And the bitcoins mined are not in your name. In this case, you would be treated as an employee and would not be subject to self-employment tax.

You might also be mining cryptocurrency but as a hobby, rather than a full-time business. In this case, it is not a self-employment activity and you wouldn't have to pay self-employment tax. At the same time, you wouldn't be able to deduct any mining-related expenses either.

If you're mining cryptocurrency in your own name and as a business, you would be considered self-employed and expected to pay self-employment tax. You would also be able to deduct certain expenses (hardware and software costs, electricity and utility bills, etc) from your profits in order to determine your net taxable income.

5. What about the tax treatment for cryptocurrency that you receive in a hard fork. Do I need to disclose this in my tax return?

Most experts believe that the fair market value of the coins received on the date of the fork is ordinary income and is taxable. Plus, this fair market value also becomes your cost basis when you end up selling the forked cryptocurrency.

6. What if I haven't maintained accurate records of my crypto transactions? What can I do to remedy the situation now?

For starters, you can use our services to help you organize your transactions and maintain accurate records. If there are still some discrepancies (for instance the exchange you used is no longer operational), utilize an estimate and explain why you have used such an estimate in your tax returns. This will safeguard you from a hefty penalty in case the Income Tax Department decides to pursue the discrepancy.

7. I have not been reporting my crypto investment in my tax returns for several years. What can I do about it now?

Since the India Income Tax Department is cracking down on crypto tax evasion, you need to act quickly. Schedule an appointment with us and we shall help you navigate this treacherous path. 

Bottomline

These are some of the most common questions that crypto investors are currently plagued with and your CA / Chartered Accountant should have strong, confident answers for these. If you're an active crypto trader and you feel like your CA / Chartered Accountant isn't as well-versed in crypto tax matters as they need to be, hiring a crypto tax accountant like us might be a good idea.

 DISCLAIMER

The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA

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