It is all a win-win situation for crypto-traders as long as the prices of crypto-coins are blooming. The issue arises when the income from cryptocurrencies is taxed.
A number of Indians were into crypto-trade since past few years, making a hell lot of money. But now, it becomes a major issue for all of them to pay taxes associated to the income earned. The Indian Tax Laws are to be accredited in this regard. The laws do not precisely define the ‘nature of digital currency investments’, however, paying taxes on earned income is mandatory.
All this has been laid stricter emphasis on, after the rule of Narendra Modi Government.
Towards the end of last year, the IT department started implementing all necessary laws in its functioning. Large-scale surveys were conducted throughout the country and strict monitoring of all IT sector firms took place. A number of cryptocurrency exchanges were closely analysed and approximately 500,000 investors received notices regarding non- payment of taxes.
The Reserve Bank of India restricted all the banks from dealing with any individual investors or crypto-exchange platforms. There exists a panel appointed for the purpose of issuing regulations in regard to crypto-assets under the Modi Government, and unless any final draft is released by them, these restrictions would be valid.
The crypto-exchange platforms, however, lay emphasis on the payment of regular taxes. They provide their users with periodic guidelines to not skip the payment of taxes on the income earned.
In case you are a crypto trader, here’s exactly what you are required to do.
As suggested by an experienced financial planner,
“Under this, certain expenses related to business, office maintenance, such as buying a computer, internet expenses, office rent, administration cost, etc., can be deducted.Then, on the remaining amount, tax will be applicable as per the slab.”
It has also been specified that in addition to the above, it is extremely necessary to choose an appropriate form of filing returns. An individual must aptly judge whether he is required to treat the amount as capital gains or income from other sources or income from other business and thereby make the right choice between ITR2 or ITR3.
Further, in case of trading over the ₹2 crore slab, you might just need to get yourself a tax audit by an authorised chartered accountant.