How Cryptocurrency Tax Works in India

How Cryptocurrency Tax Works in India

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A digital currency known as cryptocurrency employs encryption to protect transactions, regulate the creation of new units, and confirm the transfer of assets. It’s decentralized, meaning no central bank or authority can handle it. And you are interested prices of Ethereum

Cryptocurrency tax is a term used to describe how governments deal with cryptocurrencies like Bitcoin and Ethereum. The Income Tax Department has declared cryptocurrency mining an unorganized sector in India. Many other countries have also put in place laws regarding taxation on cryptocurrencies, including China which banned all ICO services in 2017, making trading illegal in China until now, as well as Japan which has recently announced plans to regulate its cryptocurrency market due to risks involved therein both at the legal level through self-regulatory bodies such as Japan Virtual Currency Exchange Association JVCEA) or crypto exchanges themselves.

Taxation on cryptocurrency in India 

Cryptocurrency is treated as a commodity, not a currency, and therefore not subject to any tax. It’s also not considered a security or financial product for tax purposes. Cryptocurrency does not qualify as foreign currency or equity held in India under Section 66A of the Income Tax Act (ITA) 1961. However, if you have cryptocurrency outside India, then it will be considered an asset and taxed accordingly. 

Cryptocurrency mining taxation in India 

Mining is a taxable activity under the Indian Income Tax Act, 1961, and the Income Tax Rules, 1962. As a result of this taxation treatment, mining income will be taxed under the head ‘Profits and Gains of Business or Profession. 

Income from mining activities is classified into two categories:

●       Mining income (which includes any profits) earned by persons carrying on trade or business as miners in India and outside India; and

●       Mining expenditure was incurred to acquire minerals and other natural resources used by them in their businesses. 

Do you need to pay tax for trading with cryptocurrencies

You must pay taxes on cryptocurrency trading profits, mining profits, and losses.

Cryptocurrency trades are taxable per the Income Tax Act 1961. If you have made any profit from your cryptocurrency trading activity, you will be liable for income tax at 30%. Similarly, if you have incurred a loss from your cryptocurrency trading activity, you will also be responsible for income tax at 30%. 

You can also choose to report this amount under section 74AB. Still, no provision in the law allows reporting losses on account of Bitcoin mining activities directly under section 74AC or other similar sections like section 74A (c) or (d). 

Taxation for earning income from cryptocurrencies through mining. 

Cryptocurrency mining is taxed as business income. To be eligible to benefit from being a business, cryptocurrency miners must pay themselves per their earnings and other expenses incurred during their business/profession. 

Cryptocurrency mining income is taxable under the head “business or profession” of the Income Tax Act, 1961 (ITA). The income earned from cryptocurrency mining is exempt from tax if it does not exceed Rs 50 lakhs in a financial year or 20% of your annual turnover if it exceeds this amount. You can claim this exemption only once during any given financial year, but you can carry forward unused exemption for three years after claiming it for the first time. 

You need to pay taxes when you make money from any source. 

You need to pay taxes when you make money from any source. You can’t evade the tax by hiding your profits in an offshore account because that would mean that the income was not made in India and, therefore, would not be subject to taxation. 

If you have invested in cryptocurrencies or are mining them, your taxable gains will be shown on Form ITR-VI for 2018-19 (if you filed through e-filing). The details of how much money has been invested and whether it’s made as capital gain/loss will also be indicated on this Form. They will also show themselves here if any losses are incurred during this period. 

Conclusion 

Cryptocurrency taxation in India is an evolving topic. Several proposals have been put forth by both pro-crypto and anti-crypto groups, but no clear consensus has been reached yet on any one idea for taxation policy. Cryptocurrencies are still relatively new compared with other financial instruments such as stocks or bonds; therefore, there are many unanswered questions regarding their legal status under Indian law today.”  The bitcoin trading platform helps the users to get the exact knowledge about the things related to the cryptocurrency.

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