Commerce Bitcoin, Dogecoin, ETH or Matic? Assessment Earnings Tax and ITR Submitting Guidelines for Your Earnings – The Monetary Specific


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Income tax payment and ITR filing rules for income from trading and investing cryptocurrencies in 2021: Indians have invested billions of dollars in cryptocurrencies like Bitcoin, Dogecoin, Ethereum, Binance, Ripple, Matic and others through popular coins. The trading volume of cryptocurrencies has increased many times over since the nationwide lockdown last year.

According to a recent Bloomberg report, Indian investments in cryptocurrencies rose from $ 923 million in April 2020 to nearly $ 6.6 billion in May 2021. The crypto investments of the Indians have grown, although the RBI or the government have not made a clear regulation on this.

The RBI tried to impose some sort of ban in 2018 by restricting banking facilities to crypto exchanges, which was later ruled out by the Supreme Court. Since then, India’s involvement in crypto trading and investing has grown exponentially, especially after the Covid-induced lockdowns tied youth workers to their homes and left them plenty of time to explore new ways to make money quickly.

As the tax filing season for AY 2021-22 begins, many crypto investors in the country may be concerned about the tax implications of their cryptocurrency trading and investment income over the past fiscal year. Here is an explanation for them:

The income tax department has not yet provided any clarification regarding the tax implications for the profits generated from the crypto transactions. Even if cryptocurrencies are not yet legalized by the Reserve Bank of India (RBI), according to Archit Gupta, founder and CEO of Clear, it is not advisable to avoid income tax on their profits.

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Gupta told FE Online, “All income, except those specifically excluded by the Income Tax Act, is subject to taxation. Therefore, due to the nature of the transactions, investors will be subject to income tax on the crypto transactions, even if the income tax department has not yet clarified the tax implications for these transactions. “

How do I pay taxes on crypto transactions?

According to Gupta, the profits from the crypto transactions would become taxable as corporate income or as capital gains according to common usage of income tax, depending on the nature of these transactions and the investor’s intentions.

“Profits from the crypto transactions are taxed as ‘corporate income’ if the deals are frequent and the volumes, otherwise they are taxed as ‘capital gains’ when the purpose of ownership is primarily to benefit from a longer term stake over an increase in value and there are fewer trades or they are held as investments, ”Gupta said, suggesting that this needs to be verified for every taxpayer and that taxpayers need the help of an expert.

If crypto transactions are reported as business income, the implications of the GST Act must also be checked.

Under the Income Tax Act, income from businesses is taxed at income tax rates, and when held as “investments” it is taxed in a manner similar to capital gains.

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Short Term Or Long Term Profits?

Gupta went on to say that if the crypto transactions are classified as “investments” they will be subject to short-term capital gains tax if held for less than 36 months under applicable income tax tables. However, if the crypto assets are sold after the investment has been held for three years, they can be treated as a long-term investment and taxed at 20 percent with indexation advantage.

Tax at the highest level?

There are some views that income from crypto assets should be treated as “speculative business income” and taxed according to the highest tax bracket. However, Gupta said that pending clarification by the income tax authorities, taxpayers can benefit from classifying this as normal business income or capital gain.

ITR registration

According to Gupta, it is important to report profits in the ITR and tax profits even if there is no clarification from the income tax department.

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