What are rules for filling ITR and payment of Income Tax on earnings from cryptocurrency trading 2021?

Reserve Bank of India has not made cryptocurrency legal until now but one is not advised to avoid paying income tax on its profits. In relation to this as Indians are moving at a fast pace towards investing in cryptocurrencies like DogecoinBitcoinEthereumRippleMaticBinance and many other in the row. Since nationwide lockdown of previous year, trading with cryptocurrencies had increased gradually.
Still there is information regarding RBI, that it had imposed a ban in 2018, thereby restricting banking facilities to crypto exchanges which was rejected further by the Supreme Court. Immediately after all this, there was growth in Crypto trading and investments. Main reason of growth was lockdown imposed due to COVID, whereby restricting the salary of youth to their homes. This helped the youth to make money fast by finding new ways of making money as they were having ample amount of time due to lockdown.
With the start of the taxable time period i.e. AY 2021-22, various crypto investors round the country would be thinking of tax implications of their earnings from crypto currency investments and tradings in last financial year. So for such investors worrying about these implications, below are answers to their queries:
• The department of Income Tax has not yet clearly stated about the tax implications to be imposed on their profits earned from crypto tradings.
• But according to some business tycoons, the entire income, except those which are exempted by the Income Tax Act are taxable. Therefore, investors would come in lane for paying income tax on their crypto transactions. Despite of the fact that Income Tax department has not clearly stated about the impact of such transactions.

Manner in which tax has to be levied on crypto transactions

Depending upon the nature of the crypto transactions, the gains on such transactions would be considered taxable and most importantly depending on the intention of the investor.
As for instance the gains from the crypto tradings would come under taxable earning as ‘business income’. But if tradings are regular and volumes are high then they would be taxed as ‘capital gains’. All this has to be reviewed by every taxpayer, where ‘advise’ is suggested for the taxpayers to take for levying tax.
In case the crypto tradings are considered as business incomes then GST Law implications are required to be examined. Therefore as per to the Income Tax Act, business income would come under Income tax slab rate and in case of investments, taxation would come under the heading ‘capital gains’.

Types of Capital Gains

The type of crypto transactions could be further classified into short-term or long -term capital gains. As if transactions are under the heading ‘investments’ then are liable for short-term capital gains, if in case these are held for a period less than 36 months. But if the investments are sold after being held for three years then they would be considered as long-term capital gains.

One of the youth entrepreneurs is of the view that uptill any notification from the income tax authorities, the taxpayers could easily benefit by putting the earnings and investments in the tax slab as business income or capital gain.

Therefore, although there is no such information being served from the Income tax department regarding filling of tax for the investors; Gains in the ITR should be mentioned and tax should be paid on such gains. This would be legalised way from the earnings of Crypto investments and tradings.

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