Guidance on major concerns in crypto is asset protection, tax exemption & financial privacy which needed guidance:
TAXATION ASPECTS OF BITCOIN
- Many economists have gained interest regarding the taxation of Bitcoin as it becomes quite challenging to take out the related data and thereby, formulate a policy for its taxation. In India, as well, the experts are gaining interest to provide extensive international taxation services related to cryptocurrency.
- Experts are always concerned about providing the latest developments and managing their clients across the world. Thus, the Indian experts are pretty much enthusiastic about incorporating their knowledge in the field of digital assets to be sure about their future economic success.
PROVISIONS RELATED TO TAX FILING
- Any person who indulges in the trading of Bitcoin and thereby earns any income from such transactions are required to declare their income and pay taxes according to the tax rate applicable. But Due to the absence of any regulation or policy by the Central Board of Direct Tax or ICAI, Indian investors are left on their own, on order to classify the income from cryptocurrency in India.
- In India, there is no policy for trading in cryptocurrency, but the IT Act, of 2000, does not restrict from investing in cryptocurrency and as a result, income from such investment is required to be disclosed and hence be taxed.
CLASSIFICATION OF BITCOIN UNDER DIFFERENT HEADS AND THEIR TAXATION
INCOME FROM BUSINESS
- Under this, the investor should be a bitcoin trader and shall have substantial and frequent transactions, which is required, to be classified as a business. the income thereby, be classified as profit and loss of the business accordingly.
- In such a scenario, the income from bitcoin be taxed at the rate applicable on the business under the Indian income tax slab. Thus, if the turnover is less than Rs. 250 crores, tax is applicable @ 25%, otherwise, @ 30%.
INCOME FROM PROFESSION
- In case the person is a blogger, freelancer, or consultant earning in Bitcoins such income be taxed under the slab rate applicable to his income slab. Such persons receive bitcoin while providing any professional service and thereby selling the received bitcoin through Indian exchange.
- After such a scenario, the income from bitcoin is taxed at the rate applicable on the profession under the Indian income tax slab. Thus, if the turnover is less than Rs. 250 crores, tax is applicable @ 25%, otherwise, @ 30%.
INCOME FROM CAPITAL GAINS
- In case, the person is a casual investor in Bitcoins, any profit arising from such transactions would be taxed as short-term capital gains or long-term capital gain based on the period of holding of such investment.
- For the investment to be considered as a long-term investment, the investor shall hold the bitcoin for a period of at least 2 years from the date of purchase.
- Professionals are favoring these parameters to consider Bitcoin as a stock of a company instead of being used as a mode of payment so that it becomes easier to file the return and pay taxes.
- In the case of long-term capital gains, the tax rate applicable is 15 percent while for short-term gains, the same be included in the total income and taxed accordingly. The assessee also gets the benefit of indexation on the capital gains.
INCOME FROM OTHER SOURCES
- There are persons doing Bitcoin mining i.e., they are generally selling the bitcoin and never purchasing any Bitcoins. As a result, there is only income flowing in the hands of the assessee and there is not outflow, thus taxed under income from other sources.
- Such an assessee will be taxed as per the Income-tax slabs and if the income exceeds 10 lakhs, then the applicable tax rate is 30 percent plus surcharge and cess.
FAQ on cryptocurrency in India
Q.: Is it legal to trade cryptocurrency in India?
- There are no laws preventing (or allowing) cryptocurrency trading. In that way, cryptocurrencies are akin to other asset classes like gold, commodities, and real estate. A country’s currency is a legal tender that is backed by a sovereign guarantee. Only the Reserve Bank of India (RBI) has the authority to issue money in India.
Q.: How is cryptocurrency taxed In India?
- The Income-Tax Act of 1961 in India provides no particular guidance on the taxation of cryptocurrency. However, taxpayers who have invested in cryptocurrencies and gained from them must report their transactions.
- Concerned governments around the world are working on standard taxation laws for cryptocurrencies. There is no way to avoid paying taxes on cryptocurrency gains.
- The Indian government intends to organize virtual currencies and their tax treatment into 3 categories: payments, investment, and utility. The Ministry of Finance has apparently organized a committee to investigate whether cryptocurrency trading profits should be taxed.
Q.: Should cryptocurrencies be classified as “currency” or “asset”?
- The existing regulations are likely to continue if the government classifies bitcoins as an asset or commodity. If there is a separate code or guidelines for taxing virtual currencies, this could change.
- When it comes to cryptocurrencies, there is still a great deal of uncertainty when it comes to the rules and regulations that govern them. Your gain will be classified as long-term capital gains if you hold your cryptocurrency for more than 36 months.
- Short-term capital gains, on the other hand, are gains made over a shorter period of time. These profits are taxed at various rates. The gains on long-term investments are taxed at a rate of 20%. The rest, including those with gains obtained over a shorter period of time, are liable to personal taxation at the relevant rates.
Q.: Is it possible to categorize crypto-trading as a business activity?
- If a trader makes a lot of cryptocurrency transactions, any profit he makes after that is taxable as business income. If you own cryptocurrencies as a’ stock-in-trade,’ the income you earn from them will be taxed.
- As a result, if you continue to trade cryptocurrencies, you should be informed that any profits you make will be taxable as business income.
- Profits from crypto assets are classed as business income or capital gains according to on the facts and circumstances of each case. If an individual trades in such assets often or if his livelihood is based on such earnings, then such earnings are classified as business income.
- Because cryptocurrency income is classified as business income, it will be taxed at the rate that applies to business income. If cryptocurrency income is not characterized as either business income or capital gains, it will be counted as other sources of income. This is what is referred to as residuary income.
- “In such circumstances, corporations will be taxed at a rate of 25%, while individuals will be taxed at their respective tax slab rate after adding the profits to their income.”
Q.: What are the Major Concern in crypto?
Major Concern in crypto is Asset Protection, Tax Exemption, and Financial Privacy which required Guidance:
- It’s difficult not to be concerned about America’s economic situation, especially now that the country’s national debt has surpassed $22 trillion and India is moving towards the big trading and holding towards crypto.
- People have been forced to look for additional means to secure their money and transfer them to new geographic places due to the unstable banking system.
- According to two sources involved with the discussions, the government intends to tighten the regulation of cryptocurrencies in order to discourage investors from keeping them. However, the government is unlikely to follow through on an earlier intention to ban private digital coins.
- Instead, only those that have been pre-approved by the government could be listed and traded on exchanges, according to the sources, who asked not to be named since the discussions are private.
- “A coin can only be traded if it has been approved by the government; otherwise, holding or trading it in may result in a penalty,” claimed the first source.
- In the parliamentary session that begins this month, the government hopes to propose and pass a cryptocurrency law.
SPECIALIZED ACTIVITIES BY OUR TAX EXPERTS
- They help their clients with information related to cryptocurrency.
- Assist them regarding the way in which they can trade in a lawful manner.
- Assisting in matters related to recovery and reporting of missing or lost records.
- Helps in proper reconciliation of unrecorded and lost transactions.
- Complete tax compliance and filing on behalf of their client.
- They also provide tax planning and strategies for identifying various cryptocurrencies and non- cryptocurrencies for saving and investment purposes.