Investors of Crypto in India are around 7-8 Million who are involved in holding above $1 billion investments being estimated unofficially. In India, it’s legacy is being doubted but then also taxes are certain on it. As the profits which are earned from trading in Crypto are prone to taxation too. Therefore, being a trader it’s essential to know in detail how the profits and income would be taxed from trading in Crypto.
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Income Tax Act
As per to the Income Tax Act 1961, all the earnings of an individual will constitute their total income, despite of the fact that they are earned legally or not. This concludes that entire cryptocurrency concerned activities earned would be treated as taxable income of that trader. Also as per the Goods and Services Tax Act any business activity which is related with cryptocurrencies would be treated as taxable, unless some are in specific exempted.
As such any of the formal database is not maintained by the government on the earnings from cryptocurrency by the Indians. Still earnings from Crypto would be taxable and could be treated as Income from other sources of an individual.
Earnings from Cryptocurrency Being Taxed
There are four major factors which are been analysed by analysts to define on which terms Crypto assets could be taxed. Those are:
• Bitcoins being mined; Miners before thinking of buying Bitcoins have to keep equation in mind for solving 64 digit hexadecimal solution, popularly named as hash. This is responsible for consuming large amount of energy and consumption of electricity as well, so very expensive procedure. Through mining activities concerning Bitcoin, China has covered around 65% of the market, where India is not having any place in top 10 countries who are involved with mining of Bitcoin. Bitcoins are self generated assets so they could be taxed either ways (‘Income from other sources’ or being treated as ‘capital gain’).
• Bitcoin used as investment would also contribute in levying tax on the same depending upon the tenure of such an investment as if it is for long then tax would be under long term capital gains and if investments are for short tenure then would be taxed under short term capital gains. Only exception with this is that if these are not categorised under capital assets then would be taxed under Income from other sources.
• Tradings done in Bitcoins would be considered as business income as per to the notifications by the government. This would be taxable therefore under the tax slab.
• Bitcoins could also be taxed as Income in hands of recipient when profits are earned from investment in profession or business. Although government has notified cryptocurrency to be not legal and so could not be treated as currency. India is no doubt involved with 10% of Bitcoin trading so tax is essential on it, but RBI and other government sources are of discussing that as it is not an asset being treated as currency so where it would land up in the Indian tax system.
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