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!

FAQ about Cryptocurrency Taxation

Below are few FAQ about Cryptocurrency Taxation. This post is based on CA or Chartered Accountants perspective on Cryptocurrency Taxation. For any other questions, please schedule an appointment

FREQUENTLY ASKED QUESTIONS

1) Is it legal to hold, trade or invest in cryptocurrencies in India?

There is no explicit ban on holding/trading/investing/dealing in cryptocurrencies.

The only prohibition in place is on banks, regulated by the RBI, from providing banking access/services to any individual or entity dealing in virtual currencies.

2) Do I have to pay tax on income or profits earned from cryptocurrencies?

Absolutely. It is essential to declare such income in the Income Tax returns and pay tax accordingly.

While investing or trading in cryptocurrencies is not illegal, any income earned thereof on which tax is not paid would be deemed as illegitimate wealth.

3) What is the rate of tax applicable to income from cryptocurrencies?

Depends upon the nature of activity undertaken with cryptocurrencies. The rate of tax would differ for investors vis-à-vis traders, miners or blockchain businesses.

4) What if I don’t pay tax?

The Indian Income Tax Department can obtain information on persons/entities holding cryptocurrencies from various sources.

In case a person/entity is found to have evaded taxes, severe penal provisions under the Income Tax Act would become enforceable.

5) Do I need to report cryptocurrencies held/traded outside India?

Yes.

In case you are an Indian Resident, all assets held outside India are required to be disclosed in the Income Tax return. Further, any income earned from such assets shall be chargeable to Income Tax in India. Failure to do so can invite severe penalties under the Black Money and Imposition of Tax Act, 2015.

6) How do I monitor all my transactions and track profits/gains?

We at CA Mitesh and Associates will help you maintain a consolidated and up-to-date record of all transactions and incomes earned from any Blockchain or cryptocurrency exchange.

7) How do I compute and report my Income Tax liability?

We at CA Mitesh and Associates will help you to comprehensively ascertains any and all tax liabilities, followed by assistance in completing and filing Income Tax Returns.

8) Can I receive an Income Tax notice?

Yes.

A notice may be served under several circumstances including non-reporting of income, shortfall in payment of tax or non-disclosure of foreign assets/holdings.

9) What happens when I receive an Income Tax notice?

The tax assessment notice shall need to be responded to via personal representation or a written submission.

We at CA Mitesh and Associates will handle end-to-end assessment procedures. All responsibilities of corresponding with the Income Tax Department are handled, ensuring least possible inconvenience to our clients.

10) How is crypto tax calculated?

You can be liable for both capital gains and income tax depending on the type of cryptocurrency transaction, and your invididual circumstances. For example, you might need to pay capital gains on profits from buying and selling cryptocurrency, or pay income tax on interest earned when holding crypto.

11) I lost money trading cryptocurrency. Do I still pay tax?

The way cryptocurrencies are taxed in most countries mean that investors might still need to pay tax, regardless of if they made an overall profit or loss. Depending on your circumstances, taxes are usually realised at the time of the transaction, and not on the overall position at the end of the financial year.

12) Which of your crypto activities are taxable?

Taxability doesn’t mean you will pay tax on every crypto engagement under the sun. These are the cryptocurrency trading and investment activities that require you to pay tax. These activities cut across almost all countries. 

- When you sell your cryptocurrency for fiat (USD, GBP, INR, AUD, JPY, EUR…)
- Exchanging your cryptocurrency for another cryptocurrency
- Using your crypto assets to pay for goods or services
- When you receive cryptocurrency as earnings (either through mining or as payment for services offered to a third party)

13) Which of your crypto activities are Non-taxable?

Not all cryptocurrency engagements attract taxes. Here are the activities you don't need to pay taxes on: 

- When you move your cryptocurrency from one wallet to another or between crypto exchanges. 
- Donating cryptocurrency to a non-taxable charity organization
- When you buy crypto with fiat 
- When you give cryptocurrency as a gift to a friend or family. 


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

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

FILE INCOME TAX RETURNS FOR YOUR BITCOIN PROFITS - 2021

Profited from Bitcoins or other Cryptocurrencies and not sure how to file your income tax returns? Did you know gains from bitcoin can be treated as capital gains or Forex trading gains and hence taxed? We are India’s leading tax filing portal to help you to file your returns to calculate your tax and finish filing income tax returns within 2 days.

Anyone who earns any income in Bitcoin needs to declare their income and pay taxes. That seems fair enough. But this is also where things start getting confusing for most people.

The fact is that, in the absence of any guidelines from CBDT, ICAI, RBI or the Income Tax Department, cryptocurrency investors from India are largely left to figure this out on our own. As an early adopter to crypto, I was perplexed with the subject of accounting my income in cryptocurrency from blogging and consulting. During my research into this subject, I’ve interviewed professional tax consultants and an income tax official.

The fact is that the IT Act does not stop you from earning or profiteering from investments in cryptocurrencies and allows you to declare your gains and pay taxes on it. Therefore, as per a professional tax consultant, the four most common and safe ways of filing your returns after declaring your income from cryptocurrencies are as follows:

Capital Gains

If you are a casual investor in Bitcoins, any profit resulting from the sale of your cryptocurrency is taxed as short-term capital gains as per your income tax slab rate. If your income exceeds Rs 10 lakh then there will be a 30 percent tax on the profits plus surcharge and cess.

Professional tax consultants seem to be favoring these parameters to consider Bitcoin as a store of value similar to a stock in a company as opposed to a mode of payment in order to make it easier to file returns for their respective clients.

In case of any long-term capital gains, the tax rate applicable is only 20 percent on your profits. The time period of the asset needs to be considered here while making an assessment and most auditors seem to be preferring to equate the time period of equity (minimum holding period of 2 years) to Bitcoins. You can also account for indexation to reduce your tax burden.

Business Income

If you are a Bitcoin trader with substantial and frequent transactions it could be considered as a business (trading) income. Here you can account for your profit and loss accordingly. CBDT in the past has issued a circular to distinguish when equity is held short-term as an investment versus a stock-in-trade.

Here, an applicable rate of income tax as per your income slab will apply. If your income exceeds 10 lakh rupees then the applicable tax rate is 30 percent plus surcharge and cess.

Professional Income

If you are a blogger, freelancer, or consultant earning in Bitcoins, you may be wondering how to file your taxes for income from any services rendered to clients in India or abroad.

For example. one of my client is a consultant paid in Bitcoin and also a professional blogger on Steemit.com. On Steemit, he earns in the cryptocurrency, ‘Steem’, which he then sells to purchase Bitcoin. Then, he uses an Indian Bitcoin exchange such as CoinSecure.in or Zebpay to sell Bitcoin for Indian rupees and cash out his earnings. This is fully transparent as all Indian exchanges adhere to KYC norms.

Here, an applicable rate of income tax as per his income slab will apply. If his income exceeds Rs 10 lakh then the applicable tax rate would be 30 percent plus surcharge and cess.

Income from Other Sources

What if you are mining Bitcoins? If you fall under this category of Bitcoin users then you are likely to be only selling and never purchasing any Bitcoins. This is somewhat similar to rendering services as a consultant and earning in Bitcoin with the only difference being that you are not a professional.

You will be taxed as per the Income-tax slabs and if your income exceeds 10 lakhs, then the applicable tax rate is 30 percent plus surcharge and cess.

It is wise to declare your income from Bitcoins in your annual tax returns and hire an excellent professional tax consultant to do your accounting if you plan on mining, earning, or investing regularly in Bitcoins.

WORLDWIDE CRYPTO LICENSING

Our lawful service includes helping the world’s leading blockchain and cryptocurrency ventures to enhance and retain adherence with securities law, representing investors and consumers in high personal and class action lawsuits, resolving disputes between clients and virtual currencies, helping peer-to-peer traders and exchanges comply with the Bank Secrecy Act and the State Money Transmitter Act.

LOOKING TO HELP YOU RESOLVE LEGAL CRYPTOCURRENCY CHALLENGES

There are a number of complicated difficulties with cryptocurrency. If you are a company owner or an investment firm who wants to invest in IEO, IDO, ICO, DeFi Project & STO or use digital currency as a medium of exchange, you must be aware of the various securities and commodities, money transfer, financial fraud, corporate and tax laws throughout every country.

We help our client base navigate and excelle in the blockchain industry. With a thorough knowledge of the market framework, we can share useful insights for entrepreneurs on the crucial integration of these innovations into their current and potential products and services. Offer, safeguard their corporate investment and schedule, and call for the changes needed to current blockchain legislation and regulations.

Our legal counsel is also well established for securing, managing, and implementing intellectual property privileges is one of the regions where blockchain really can stand out, endorsed by a well-extended adoption structure.

FILE INCOME TAX RETURNS FOR YOUR BITCOIN PROFITS - 2021| Cryptocurrency CA in Mumbai | Cryptocurrency Chartered Accountant in Mumbai | Cryptocurrency Tax Consultant | Cryptocurrency Tax Advisor | Borivali | Kandivali | Malad

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