Income Tax Returns | CA in Mumbai | Chartered Accountant | ITR Filing

CA Mumbai (38)

Rated among Top 100 CA in Mumbai - Best CA Mumbai by multiple websites such as Justdial, Webindia, Topcafirms.com, etc. In India, CA (Chartered Accountants) are regarded as the maestros of Accounts and Taxes, just as Sachin Tendulkar is for Cricket! This is because it is the most comprehensive course that allows gaining extensive knowledge and three long years of practical experience and exposure in planning income and investment portfolios, calculating taxes and filing ITRs under the mentor-ship of an already experienced CA (Chartered Accountant). In fact, with the advent of comprehensive online tools in the COVID era, there are a lot of applications and websites that provide both automated and manual support to plan and calculate taxes. But there are still a lot of factors that need to be considered before settling on a CA (Chartered Accountant) to plan the tax liability on one’s hard earned money. Let’s have a look at some of the factors that are noteworthy before finalizing on a CA (Chartered Accountant) / Tax Advisor: 1. Finding out the entity’s status: This is an important step since this requires assessment of the status of the taxpayer. This is because there are varied complexities in every type of entity which needs to be addressed accordingly by a relevant tax expert. See the following scenarios: Individual Status: If the taxpayer is an individual, he/she can refer to an CA (Chartered Accountant) who primarily has expertise in Direct Taxation. Corporate Status: If the taxpayer is a corporate entity, the Directors of the company might want to refer to a more seasoned CA (Chartered Accountant) / Tax Advisor who primarily has expertise in both Direct Taxation and Indirect Taxation, in addition to Corporate Tax, as well as Provident Fund, Employee State Insurance advisors, etc. Others: If the taxpayer is a Partnership Firm, LLP, etc., the partners or members might have to refer to a blend of above. 2. Assessing whether the Income and Tax Structure of the entity is complex enough to hire a CA as the fee charged may or may not be justified to the taxpayer. Following the above scenarios, an individual might just as for guidance from an CA (Chartered Accountant) in the family or friends in case the assess able income is not too big, whereas a firm or a company might need a proper team of expert advisors to mitigate the tax burden at a large level. 3. Not every CA (Chartered Accountant) is specialized in the field of taxation. Taxation is an extensive field with various branches. Finding someone experienced and specialized in the branch that a person needs help with is quite important. This could be understood in terms of the large different types of tax advisors that exists, viz., Income Tax, Gift Tax, Wealth Tax, Capital Gains Tax, Corporate Tax, GST, Customs & Excise, etc. 4. It is necessary to ensure that the CA (Chartered Accountant) is always available and updated in terms of the recent Income Tax Notifications or the ever so changing Income tax Return Forms to address any immediate changes in the taxpayer’s income or status. For example, a Capital gain somewhere in the middle of the year could change the calculations and planning of taxes and give rise to a requirement to pay Advance Tax. 5. A few common factors such as the past experience and area of practice of the CA (Chartered Accountant), the clients or industries they have served, the reasonability of the fee charged with respect to the general market fee, an example of a fruitful advise they gave to some client which was a turnaround for the client’s tax burden. Choosing a CA (Chartered Accountant) carefully is important because the person entrusts all the income details and their sources to them. So, the focus should be on to retain the same person for as long as they can be as that would ensure no scattering of personal information to a lot many people again and again. This also helps in maintaining a close relationship to build trust and faith in each other. So, keeping these small things in mind will help a taxpayer go a long way in finding a perfect advisor, consultant and a partner!

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CA for Cryptocurrency Taxation

We are CA for Cryptocurrency Taxation located in the heart of Mumbai. We have handled dozen's of client with myriad complexities on Cryptocurrency Taxation. No matter what crypto coin you are trading in - Be it Bitcoin, Ethereum, Litecoin, Zcash, Dash, Ripple etc, we can help you navigate the regulatory path with it.

 

Crypto investors and traders have been plagued by regulatory uncertainty in India. As the Indian Government authorities continue to struggle in fundamentally differentiating. Bitcoin from Blockchain, the subcontinent's economy is positioned to lose out on, what is possibly, the century's biggest revolution.

Having added to the fear, uncertainty and doubt, is the ring-fencing notification issued by the RBI, restricting banking access to Indian crypto exchanges. Despite the speed-bump, believers of the Blockchain technology remain undeterred, thanks to which trading volumes have picked up on the Indian exchanges.

Although there isn’t any clarity in tax legislation, the Indian Revenue Authorities are breathing down the necks of crypto traders. It is, therefore, imperative to accurately compute and report any income from cryptocurrencies.

Lets understand some basic fundamentals in this area

1. What is bitcoin?

Bitcoin is one of the earliest forms of cryptocurrency, forming part of the worldwide peer-to-peer payment system.  Cryptocurrency is digital money. It is considered to be more secure that the real money. Cryptocurrency uses something called cryptography to secure its transactions. Cryptography, to put it in simple words is a method of converting comprehensible data into complicated codes which are tough to crack. Cryptocurrencies are classified as a subset of digital currencies, alternative currencies and virtual currencies. Bitcoin was the first ever cryptocurrency created in the year 2009. Subsequently, there has been a rapid increase in the number of cryptocurrencies that have been created some of which are Litecoin, Ethereum, Zcash, Dash, Ripple etc. Bitcoins, in India, have slowly started gaining popularity, given the efforts of the government to move towards a cashless economy. However, one should know that bitcoins, as of today, are not centrally administered or regulated by any specific body like the RBI which administers physical currency in India. In fact, peer-to-peer transactions with bitcoins are managed using something known as the blockchain technology which serves as a public ledger for all transactions.

2. Where does bitcoin come from or how is it generated?

One can obtain bitcoins either by :
  • Mining

Mining is an activity where an individual (called the “miner”) uses his computer prowess to crack computationally difficult puzzles. The process of cracking such puzzles which are integral to the blockchain technology, help in maintaining them. As a reward for this, the miner gets new bitcoins which is nothing but creation of a bitcoin or mining.
  • Purchasing them from a bitcoin exchange against real currency

Everyone cannot be a bitcoin miner. Hence, you can consider buying bitcoins from bitcoin exchanges and store them in an online bitcoin wallet in digital form. Unicorn, Bitxoxo, Zebpay, Coinbase etc., are some of the bitcoin exchanges presently in India. Such bitcoins would be purchased in consideration for real currency. It would be interesting to note that currently, the value of 1 bitcoin is approximately about INR 3,61,610.
  • Receiving bitcoins in consideration of selling goods and services

Though this may not be a common phenomenon in India currently, there are few savvy businessmen who accept bitcoins (instead of real currency) on sale of goods or services, they deal in.

3. Is bitcoin legal in India?

As earlier discussed, bitcoin, as a medium of payment, has neither been authorized nor been regulated by any central authority in India. Further, no set rules, regulations or guidelines have been laid down for resolving disputes that could arise while dealing with bitcoins. Hence, bitcoin transactions come with their own set of risks. However, given this background, one cannot conclude that bitcoins are illegal as, so far, there has been no ban on bitcoins in India. The Supreme Court of India has in its ruling pronounced on 25 February 2019 required the Government to come up with Cryptocurrency regulation policies. The matter had been adjourned in the hearing on 29 March 2019 and has been rescheduled for hearing in the second week of July 2019.

4. How are bitcoins taxed in India?

The concept of bitcoins being quite new to the Indian market, apparently the government has not yet brought taxability of bitcoins into the statute books. At the same time, the levy of tax on bitcoins cannot be ruled out because the Indian income tax laws have always sought to tax income received irrespective of the form in which it is received. Therefore, the possibility of tax on bitcoins can be looked at under the following circumstances:

Scenario A : Bitcoin Mining

Bitcoins created by mining are self-generated capital assets. Subsequent sale of such bitcoins would, in the ordinary course, give rise to capital gains. However, one may note that the cost of acquisition of a bitcoin cannot be determined as it is a self-generated asset. Furthermore, it does not fall under the provisions of Section 55 of the Income-tax Act, 1961 which specifically defines the cost of acquisition of certain self-generated assets. Therefore, the capital gains computation mechanism fails following the Supreme Court decision in the case of B.C.Srinivasa Shetty. Hence, no capital gains tax would arise on the mining of bitcoins. This position would hold till such time the government thinks of coming up with an amendment to Section 55 of the Act. At this juncture, given that the Indian tax laws are silent on the taxability of bitcoins completely, we thought it right to comment on a probable contrary view by the income tax authorities. There is a possibility that the department may not consider bitcoins as capital assets at all. Hence, the provisions of capital gains would not apply at all. Accordingly, the income tax authorities may choose to tax the value of bitcoins received from mining under the head “Income from other sources”  

Scenario B: Bitcoins held as an investment being transferred in exchange for real currency

If bitcoins, which are capital assets, have been held as an investment and are transferred in exchange for real currency, the appreciation in value would give rise to a long term capital gain or a short term capital gain depending on the period of holding of the bitcoin. Further, long term gains would be taxed at a flat rate of 20% while short term gains would be taxed at the individual slab rate. The cost of acquisition for arriving at long term capital gains will be determined after giving the benefit of indexation. A simple example is given below to understand this :
 
ParticularsValue in INR (Only hypothetical)
No. of bitcoins purchased10
INR equivalent of 1 bitcoin at the time of purchase2.72
Value of bitcoins (A)27.2
INR equivalent of 1 bitcoin on the date of transfer8.72
Value of bitcoins (B)87.2
Capital gains (B - A)60.00
Reiterating the probable contrary view of the income tax authorities discussed under Point 1 above, the IT authorities may not consider Bitcoins as a capital asset and hence the provisions of capital gains would not apply. Accordingly, the income tax authorities may choose to tax the gains from bitcoins under the head “Income from other sources”. Further, if the income gets taxed under “Income from other sources”, the taxpayer would have to pay taxes at a rate as applicable to the tax slab he falls under. For eg, if his taxable income exceeds Rs 10 lakh, he would be liable to a tax @ 30% as against the flat rate of tax of 20% he would be liable to pay if charged to tax under long-term capital gains. The benefit of indexation as would be available if taxed under capital gains, would also not be available if taxed under Income from other sources.

Scenario C: Bitcoins held as stock-in-trade being transferred in exchange for real currency

The income arising out of bitcoins trading activity would give rise to income from business and accordingly, the profits arising out of such business would be subject to tax as per the individual slab rates.

Scenario D: Bitcoins being received as consideration on sale of goods and services

Bitcoins being received so shall be treated on par with receipt of money. It would constitute income in the hands of the recipient. Further, since the recipient received this income out of a business or profession, he would be taxed, normally, under the head profits or gains from business or profession. As regards the disclosure requirement of bitcoins in the income tax return forms, there continues to be a lack of clarity. In the budget 2018, our Finance Minister, Mr Arun Jaitley, has stated in the budget speech, “112. Distributed ledger system or the blockchain technology allows the organisation of any chain of records or transactions without the need for intermediaries. The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto assets in financing illegitimate activities or as part of the payment system. The Government will explore use of blockchain technology proactively for ushering in digital economy.”Further, the Central Bank also has chosen to reinforce its earlier message to “users, holders and traders of Virtual Currencies (“VCs”) including bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs.” Therefore, considering that bitcoin transactions are gradually picking up in India, while, laws regulating them are significantly absent, we are hopeful that the government will come up with a notification soon to dispel the ambiguity around the legality of bitcoins, their taxability and disclosure requirement of bitcoins. While this article aims at discussing the taxability of Bitcoins only, the tax treatment on transacting with other cryptocurrencies would also be similar to that in the case of Bitcoins.  
 
CA for Cryptocurrency Taxation | Bitcoin Taxation | Ethereum Taxation