Paying Tax On Cryptocurrency Trading In India

More than a decade after Bitcoin’s introduction, there is still considerable confusion about its taxes. The cryptocurrency was conceived of as a medium for daily transactions but it is yet to gain traction as a currency. Meanwhile, it has become popular with speculators and traders interested in making a quick buck off its volatility.

Depending on the type of transaction, assets are subject to various kinds of taxes. But the unique characteristics and use cases for cryptocurrency means that there are several exceptions.

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 Cryptocurrency Tax Advisors 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.

KEY TAKEAWAYS

Indian taxpayers must report cryptocurrency transactions for tax purposes.
Trading done on cryptocurrency , such as buying & selling of currency pairs, incur capital gains tax.
Cryptocurrency mining businesses are subject to capital gains tax and can make business deductions for their equipment.
Cryptocurrency hard forks and airdrops are taxed at ordinary income tax rates.
Gifting, donating, or inheriting Bitcoins are subject to the same limits as cash or property transactions.

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.

So for all your Cryptocurrency Accounting and Cryptocurrency Taxation needs, Please contact us - CA Mitesh & Associates - Chartered Accountants Mumbai

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 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.