Currency trading is a lucrative business if you know how to do it. You can earn a decent profit and use the gains to fund your life-long dreams or help you retire early. However, if you’re not careful, cryptocurrency trading taxes in India can be complicated and expensive.
This blog post will discuss legal filings for India crypto tax as well as highlight several effective strategies that individuals should adopt to increase their chances at avoiding an IRS audit.
Often, the IRS will ask for a signed, notarized statement from the custodian of the digital currency to prove that it is rightfully yours. This prevents an individual from claiming multiple “found” currencies as their own. A Notary Public or Commissioner can be hired to properly record these documents and provide them to the IRS.
There are many factors that constitute the production of income and therefore qualify as a tax liability. Some other common sources include: rental income, wages, commissions, dividends, interest and capital gains (buying or selling coins).
So far we have covered tax liabilities which include capital gains tax filing in India as well as Income Tax filing in India.
Income tax filing in India is a simple task if you have the right tools and the necessary knowledge. Taxpayers must submit Form 16A, a statement that indicates all of the business income they earned. If a business earns a large amount of cryptocurrency, it is expected to file Form 16C on a quarterly basis.
Some additional points about income taxes in India for cryptocurrency holders:
Income tax filing laws for Indian cryptocurrency portfolio are overseen by the Income Tax Department. There are no other agencies that oversee this matter and therefore it falls directly under their jurisdiction.
The Income Tax Department’s guidelines regarding cryptocurrencies state that the profits gained from investing into cryptocurrencies can be considered as “capital gains”.
Cryptocurrency profits can be considered as capital gains, which means that you pay tax on your gains as opposed to a different type of income (like salary).
Capital gains are taxed at lower rates than standard income. A capital gain is determined by subtracting the value of the asset when it was first acquired from the value of the asset when it was sold.
The Income Tax Department considers cryptocurrencies to be “assets” and assesses their fair market value on the date they were bought or sold.
Since cryptocurrencies are a relatively new asset class, there are no standardised guidelines for cryptocurrency taxation in India. However, experts have established that gains which correspond to your fiat currency investment (i.e. $1,400 USD) will be taxed at the following rates: 0%, 10%, 20% or 30%.
The Income Tax Department requires that investors immediately calculate and pay taxes on gains if their annual income is a certain amount. If you’re making less than $30,000/year (USD), you will only be taxed at the minimum rate (0%).
The good news is that there are ways to prevent your cryptocurrency investments from being subject to income taxes.
Everyone’s situation is different when it comes to filing income taxes in India for cryptocurrency holdings. There is different software available which helps to calculate and file crypto tax automatically. Binocs is one of the best services in India which will help you to calculate and file your crypto tax easily.