For the earnings you make through various avenues, it is necessary to pay income tax. In India, salaried persons, self-employed lot and businessmen are liable to pay income or professional tax, based on their yearly earning. A majority of investment options like fixed deposits in banks, post office savings schemes are also taxable. However, Indian cryptocurrency users and investors are still not clear about crypto tax in india that is partly owing to delay on part of the govt in defining cryptocurrency.
Before you decide to invest in cryptocurrency in India, it is important that you become aware of the legal stance and taxability of the crypto assets! With time, the number of people buying crypto coins and exchanging them for fiat currency is going up in the country. So, you need to know if you have to pay taxes for performing such transactions.
The Reserve Bank of India still does not regard Bitcoin and other cryptocurrencies as legal currencies. However, industry experts say there is no way you can evade paying taxes on cryptocurrency investment profits. The reality is the govt is planning to introduce regulations for governing usage of cryptocurrencies in India. So, it is only natural there will be norms for taxes related to cryptocurrency usage for the citizens.
What do the Crypto sector experts think on crypto tax in India?
While the Indian govt has taken a slow approach in introducing regulations to monitor the cryptocurrency sector, industry experts think taxation on crypto usage is inevitable. Mudrex’s co-founder and CEO, Edul Patel says Cryptocurrency gains may be interpreted from various ways such as staking, mining, selling and buying. Gains from trading any digital asset may be interpreted as business income.
The developments in India
The much touted cryptocurrency bill of the Indian govt is yet to see light of the day. However, the govt has given some hints regarding its future roadmap. Earlier this year, the Indian govt said companies dealing with any virtual currency will have to disclose their profit or loss made by using crypto transactions. They also have to show the amount of cryptocurrency as per their balance sheets. This amended Companies Act was made active this year.
A cryptocurrency is a digital token and if it is bought for investment, it can be taxable under capital gains. These can be placed under short or long term capital gains, as per the holding period. If an investor holds cryptocurrency for 3 years or more, he/she will have to pay long-term capital gain tax. These gains are taxable though the slab rate will vary from one investor to another as several other factors come into the picture. If a trader indulges in cryptocurrency transactions frequently, the profits will be taxable and deemed as business income.
The way ahead
The lack of a clear govt stance on crypto taxation has compelled the majority of traders and investors in India to use foreign crypto exchanges. It is possible that the Indian govt may impose 18% GST on transactions made on foreign cryptocurrency exchanges. The Indian cryptocurrency exchanges are already subjected to 18% GST and the users have to pay it as a trading fee. The first cryptocurrency legislation of the country will be unveiled in the winter session of the Parliament. It will likely contain details of crypto taxation in the country. If cryptocurrency transactions become regulated, investors will get more confidence and that, in turn, will generate tax revenues.