Cryptocurrency / Bitcoin Taxation Concepts in India Cryptocurrencies / Bitcoin have been subjected to the spotlight of the decade and have been grabbing the attention of the tax authorities essentially due to the high prices at which they were seen trading on exchanges in India…
How To Pay Tax On Cryptocurrency In India
In this article, we shall focus on Crypto traders dilemma as to How To Pay Tax On Cryptocurrency In India. First, a little about us - We are the leading crypto tax consultants in India. We handle all your Income Tax compliances for any incomes arising on any Blockchain or cryptocurrency trading. So while you invest, trade, mine, run nodes or offer Blockchain solutions, we are happy to take care of your crypto taxes for you.
Ok, now back to main topic, Under Indian tax laws, the nature of virtual currency investments is unclear. What is certain is there’s no escaping taxes. Notices have reportedly been served to about 500,000 investors for non-payment of taxes. In the past few months, crypto exchanges, too, have appeared on the Reserve Bank of India’ and the government’s radar. The RBI has forbidden banks from dealing with these exchanges and investors in any fashion, while a panel formed by the Narendra Modi government is working on draft regulations for digital currencies. In such volatile times, We have urging our clients to not skip paying taxes.
As the deadline for filing I-T returns approaches, here’s a look at what investors could do.
Tax On Cryptocurrency for Individual investors
As the tax treatment of cryptocurrency continues to be in the grey zone, it is open to interpretation.
In case of gains, you have to state profits or capital gains made by you from transaction in cryptocurrencies year-wise with statements showing the workings says the tax notice sent by the I-T department to investors in the last few months. As a result, most chartered CAs including us are inclined to treat these investments as capital gains tax.
The premise of capital gains is that an investment will be held for a certain period of time so that its value appreciates. These taxes are divided into ****short-term and long-term.
For most investments such as equities, jewellery, land, debt funds, etc. the time period is specified, according to which an item may be taxed under short-term or long-term gains. However, since it is not specified, we are going to assume and take the longer time-frame of three years, and only after holding the investment for three years it will be called long-term gains.
In case of a short-term gain, the amount is added to the income and taxed according to the tax slab that an individual falls under. For instance, anyone who earns over Rs10 lakh ($14,614) will be taxed at 30%.
If it falls under the long-term category, it will be taxed at 20%. The tax rate can go down further once indexation benefit is applied, which allows one to adjust for inflation during the period these investments were held. Every year, the Central Board of Direct Taxes releases the cost inflation on which these assessments are done.
However, since details of the tax treatment are unclear, We suggests a safer alternative is to report it as income from other sources. In this case, the amount gets added to the salary or business income and then taxes are paid on it as per the slab under which an individual falls.
Tax On Cryptocurrency for traders
For a trader, earnings from virtual currencies are treated as income from business. Under this, certain expenses related to business, office maintenance, such as buying a computer, internet expenses, office rent, administration cost, etc., can be deducted. Then, on the remaining amount, tax will be applicable as per the slab.
If you are a trader and your turnover crosses the Rs 2 crore mark, you need to go for a tax audit by a chartered accountant.
Another key issue is choosing the right form to file returns. Depending on whether an individual is treating it as capital gains or income from other sources or business, ITR2 or ITR3 must be picked.
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 India'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. Please note the all consultations with the CA are Paid consultations.