Cryptocurrency is an internet based form of currency that has come about in recent years and is particularly effective for conducting transactions online for goods, services and money without involving any middlemen. It has been developed with the idea to differentiate from the traditional one that is operated by a single authority but instead relies on cryptography to validate transactions between two people who wish to carry out a transaction.
It was in 2009 when Bitcoin emerged as the first decentralized cryptocurrency which could be generated through mining and its popularity has only increased since then with other cryptocurrencies also entering into circulation such as Ethereum, Litecoin, Ripple and many more. It was around this time that the Indian government started exploring strategies to bring a regulatory framework around cryptocurrencies in order to prevent money laundering and speculative investments.
1. Calculating Capital Gains :
Any person who deals in cryptocurrencies will be required to pay tax on cryptocurrency in India on their profits made through the trading activity. These profits are calculated through the cost of acquisition of cryptocurrencies and the amount generated by their sale which will be considered as the capital gains. It would be even better to maintain all the records of the transactions in order to calculate these profits. Cryptocurrency trading is a speculative business that involves a lot of risks and therefore, losses may occur in many cases.
2. Reporting And Paying Tax :
Any capital gains made through cryptocurrency trading need to be reported in a tax return form which is filed with the income tax department as per the income tax laws in India. These forms are filed on a quarterly basis and it is the responsibility of the taxpayer to ensure that all the details are done correctly before submitting it for the income tax authorities. It is the responsibility of the taxpayer to ensure that they are keeping all their tax records in order and are filing all the required forms as per the regulations.
3. Due Date And Penalties :
The taxpayer will be required to maintain all the records of cryptocurrency transactions and they need to be ready with the details of the bitcoin tax india when they file the form. They will be required to file their first tax return pertaining to their cryptocurrency transactions within 3 months from the end of the financial year in which they have made a profit.
It is important that every person who deals in cryptocurrencies also keeps a track of all their transactions, how much money has been invested into them, what are the expected profits that can be generated and other details about them. It is best if these records are kept in physical form so that there is ample proof in case a dispute arises between the parties involved in any transaction.
4. Tax Treatment :
The tax on profits that have been made through the trading activity is determined by the Income Tax Act which states that it has to be calculated in accordance with the capital gains rules. The tax is liable to be paid on all the profits and this will be reflected in the income tax form. The government has been implementing various schemes such as demonetization in order to encourage digital transactions and less cash transactions. It is vital for the traders to invest in cryptocurrencies if they wish to enhance their profits and these can be valuable in the long run.
Binocs is a Crypto Tax & Portfolio Management Software to help users track their entire crypto portfolio. It provides a single platform with real time metrics on how users are doing in the market, from value changes to volume changes, you can quickly monitor your currency and make strategic decisions accordingly.