Crypto World #10 Taxation on cryptocurrency- How does it work?
It is the responsibility and of course a necessity for every investor to pay taxes before enjoying the gains of their investments. And cryptocurrency, being an investment also has some taxation requirements which you need to be aware of.
While many governments are yet to acknowledge these currencies as legal tender, they are still exchanged using Fiat currencies during a buy or a sell. This means that they come under the tax radar automatically.
However not many are clear on the expectation of taxes on Bitcoin or any other cryptocurrency which was evident when the IT office in India recently slammed tax notices to almost 5 Lakh people for their Net worth based on crypto holdings and trading.
Applicable taxes:
Bitcoin or Ethereum or any other cryptocurrency can be easily converted into cash in any other currency (fiat), and that is why these fall under the radar for capital gains. Whether you gain or lose with your cryptocurrency dealing, your investment will be applied with the same rule as capital gains on any other stock.
For taxation, US government has declared that these virtual currencies will be considered as the capital assets like bonds and stocks. In India though, the currency is yet to be defined by RBI as a currency or an investment asset.
If it is declared as currency, then it will follow the FEMA regulations for trading. If not, it will develop the same system as any other bond or stock in the market.
Basics of cryptocurrency taxation:
If you are indulging in trading of cryptocurrency like the stock market, then your transactions will be treated the same as stock investments and the capital gains, or losses will be calculated the same way. If you are using the cryptocurrency to buy other goods, then your transaction will result in a profit or loss depending on the deal, and there might be some sales tax that will come into play.
Other factors like basis, holding period, etc. will be taken the same as the investment in stocks and bonds.
When is taxation applicable?
While cryptocurrency, being convertible into cash is treated under taxation, it doesn’t necessarily imply that only when you redeem in money, you have to pay taxes.
When you are trading your cryptocurrency to another Fiat currency like USD, EUR, etc. you are taxed.
When you are trading your cryptocurrency to another cryptocurrency, say from Bitcoin to Ripple or Ether to Bitcoin, taxation comes into play.
Taxation is applicable when you use the cryptocurrency to buy any goods or services. This will also attract sales tax apart from the possible tax on the gains.
While a cryptocurrency transferred as a gift to another wallet is not taxable, the gift tax can come into play if the amount is above the given threshold.
There are no taxes to be paid for transferring between wallets or different exchanges. These exchanges do not result in a gain or a loss, but a simple transfer of holdings and hence do not fall under the purview of capital gains tax. You need to, however, check on how the exchanges are treating the transfer.
In simple terms buying, transferring or merely holding a cryptocurrency will not attract tax. Any other event with cryptocurrency will be taxed accordingly.
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However, until there is sufficient synergy about the crypto world and fiat money, while they follow a parallel path, approaching, but then again move away the situation in the crypto exchange market, continuing the maritime theme, can be considered comparable to Tortuga. A relatively small market size de facto holding hostage speculators, whose actions today account for 95% of the world's largest crypto-sky behavior.long as lazy people do not talk about the fact that each is really just a real soap bubble, and the prediction of when they will break can not be known by anyone.
I great bitcoin news ....more zones with a favorable crypto economy, such as the Isle of Man or the Zug canton in Switzerland, appear. And the appearance of such ventilation is no less, and may be more active than rotating peanuts. Thus, the emergence of new jurisdictions where ICO and crypto have legal status.
Bitcoin becomes a hot notice from various ceilings, where people reach a consultation in crypto, some of them make various ceilings .thank @mann
thanks a lot of friends for a very interesting post, while they follow a parallel path, approaching, but then again move away the situation in the crypto exchange market, continuing the maritime theme, can be considered comparable to Tortuga. A relatively small market size de facto holding hostage speculators, whose actions today account for 95% of the world's largest crypto-sky behavior.long as a soap bubble, and the prediction of which they will break not be known by anyone.
this is on going progress.. We will arrive at that condition in near future..regarding the increasing awareness and the needs and demand of market . includes business and trades actor...
At this time, for most regulators and from a legal standpoint, cryptocurrencies are regarded as commodities or securities, not considered cash.
I am very grateful, for your information and your policy to me, great post.
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Great :)
Thank @mann
Hello. I liked your post, keep it up. Good luck to you and have a nice day :)
Well how can it be taxed if the transaction are practically untraceable?