Cryptocurrency Investments In India: Know How Much Tax Does India Charge For Profits on Digital Currency
India has the highest number of cryto owners in the world ( 10.03 crore), and crypto investments by Indians have touched to an all time high of $10 billion. It was $923 million in April last year. Though digital currency is not a legal tender in India, it does not mean cryptocurrency transactions are illegal. So it is compulsory to declare it in your income-tax returns if you have put your money in any form of digital currency and are reaping the rewards from such investments. Cryptocurrency in India: Top 5 Crypto Exchange Apps in India for Online Trading
Cryptocurrency is acquired in following ways:
Mining: When a miner solves complicated algorithms and records data on the blockchain using computing technology, He may receive payment in new crypto tokens.
Buying: Buying it from currency exchanges using real currency and storing it in an online currency wallet in digital form.
The Reserve Bank Of India(RBI) had in 2018 banned banks and other financial institutions from facilitating transactions in digital currency. The Supreme Court reversed the order in 2020 allowing trading of virtual coins like bitcoin. Though not being a legal tender, the government has already made it compulsory for companies dealing with virtual currencies to disclose profit or loss incurred on transactions. These companies also have to disclose the amount of digital currency they hold in their balance sheets. The amendments made in the Companies Act came into effect on April 1 this year. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 has been tabled by the government in the parliament and will be discussed in the Winter Session. The bill will contain requirements for income tax returns for crypto exchanges in India as well as on foreign crypto exchanges by Indian residents.
A digital token is deemed to be a capital asset if it is purchased for investment. It will bound to be taxed under capital gains, which is further categorised into long-term or short-term capital gains, depending on the holding period. Hence if you have bought cryptocurrencies like Dogecoin, Bitcoin, Binance etc, you will be liable to pay income tax on it.
When you are filing income tax on the profit from cryptocurrency investments, you have two options — either prove that your income from cryptocurrency is a business or an asset class income or opt for the ‘income from other sources’ category.
In the UK and USA, investments in cryptocurrencies are treated like capital assets. In India, assets which are held for over three years are lost term assets, and short term assets are those which are held for less than three years.
If you held on to your digital currency for more than 36 months, then your gain will be classified as a long-term capital gains tax and will be subject to tax at 20%, plus applicable surcharge and cess. This means that your tax amount will be calculated after adjusting for inflation index. Since the purchase price is adjusted for inflation, the capital gain gets reduced. The Central Board of Direct Taxes releases the cost inflation on which these assessments are done annually. Bitcoin Celebrates 13th White Paper Anniversary: ‘9 Page White Paper Which Changed the Way We Look at Money’, Tweets Cryptocurrency India
The Indian government is mulling over levying the 18% Goods and Services Tax (GST) on transactions On foreign Cryptocurrency Exchanges in order to level the playing field with domestic ones. India has also reportedly considered a 2% equalisation levy on transactions with foreign crypto exchanges. For Indian cryptocurrency exchanges, the 18% GST is charged as the trading fee to customers, which is similar to the setup for stock brokerages.
(The above story first appeared on Today News 24 on Nov 03, 2021 05:04 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website todaynews24.top).
