There is a huge curiosity in people to invest their money in cryptocurrencies such as Bitcoin, Ethereum, Ripple, Monero and others. However there has been no clarity on how the government of India will treat any gains made out of this investment. Before Knowing about the provision of taxation, first of all let’s understand what is cryptocurrency?
What is Cryptocurrency?
Cryptocurrency is a digital currency created from complex algorithms which are verified and corroborated in a public ledger. These currencies are then encrypted as per the requirement of financial security to ensure that it can’t be tampered with by hackers. These cryptocurrencies are stored in digital wallets which can be accessed through secret keys. You can hold different crypto currencies and can manage them under the software which provides you a cryptocurrency portfolio. Transactions in crypto currencies take place instantaneously which results in no transaction fees, thus making it cheaper to use than using credit cards or PayPal.
Detailed Information On Crypto Tax In India
The Indian government has finally stated that if you earn over Rs. 10 lakh a year from trading in cryptocurrencies then it will be considered as a business income and any profit made on the sale of your cryptocurrency assets may also be considered as taxable income for the financial year. If you have not registered yourself for paying crypto taxes then you need to register yourself by July 31st 2018 else starting April 1st 2019 income tax must be deducted at source from your earnings even if it is below Rs. 10 lakh per year.
The Income Tax department has been now considering cryptocurrencies such as Bitcoin, Ethereum, Ripple and Monero as financial assets rather than currency, which will make it mandatory to pay income tax on profits made out of these. The source of this income would be the proceeds received by individuals or companies in the value of cryptocurrency.
Earlier anybody who had made money through trading digital currencies was charged with tax evasion; but due to lack of clarity in India, many people were able to evade their taxes by simply transferring the money into other countries where they paid no taxes at all.
But the Income tax department has now made it clear that no person can avoid paying taxes by converting his money into cryptocurrency. Even if you transfer the gains made in cryptocurrencies, it will be considered as taxable income and any potential loss would also be considered as taxable income.
In India, the Reserve Bank of India has issued a warning against using cryptocurrency and has also cautioned people about the risks involved in investing in cryptocurrencies.
Any profit made from the sale of cryptocurrency assets must be taxed as per income tax laws of India. This effectively means that any gain made by its trading would be treated as an income hence will be taxed by the government. In case you have sold your digital coin at a loss, then you can’t claim that this loss is deductible from your salary or business income. The maximum amount that can be claimed as a loss is Rs. 1 Lakh per financial year under section 80C of Income Tax Act.
In summary, if you earn over Rs. 10 lakh a year then you have to pay tax on the profits made out of crypto assets. It is also your choice if you want to take tax deducted at source (TDS) or not as per your choice, but as a general rule it’s advisable not to sell your crypto assets to avoid paying even lower tax than what you actually owe.
If you want to pay your tax in India then there are many services available which can make this work very easy. The service which I will recommend you to use is Binos. Binocs is a specially designed crypto solution provider made for India. Binocs will make your crypto investment very smooth and easy while its come to managing it.