Cryptocurrency tax payment and ITR filing rule 2021
Indians have invested billions of dollars in cryptocurrency corporations such as Bitcoin, Dogecoin, Ethereum, Binance, Ripple, and Matic, among others. Since the country’s national lockdown last year, the volume of cryptocurrency trade has increased many times over.
According to a recent Bloomberg report, investment in Indian cryptocurrency is expected to reach nearly $6.6 billion by May 2021, up from $923 million in April 2020. Despite the fact that the RBI and the government have not clearly regulated it, Indians’ interest in cryptocurrencies has grown.
The RBI attempted to impose a type of ban in 2018 by restricting banking services to crypto-exchanges, but it was overruled by the Supreme Court. Since then, Indians’ interest in cryptotrading and investment has grown exponentially, particularly in the aftermath of Covid’s lockdowns, which confined wage youth to their homes, giving them plenty of time to experiment with new ways of quickly making money.
Many crippling investors in the country may have been concerned about the tax implications of their earnings from cryptocurrency trading and investment during the previous fiscal year at the start of the AY 2021-22 tax filing season. This is an explanation for them:
The income tax department has yet to provide clarification on the tax implications of crypto transaction gains. Despite the fact that the Reserve Bank of India (RBI) has yet to legally regulate cryptocurrency, Archit Gupta, founder and CEO of Clear, advises that it should not avoid paying income tax on its gains.
“All income, except that specifically exempted from the Income Tax Act, is taxable,” Gupta says. As a result, while the revenue tax department has yet to clarify the tax implications of these transactions, investors will be required to pay income tax on cryptocurrency transactions based on the nature of the transaction.
How to pay taxes on Crypto
According to Gupta, the gains from transactions are taxable as corporate income or capital gains, depending on the nature of the transactions and the investor’s intent.
“If trades are frequently held in nature and volumes are high, profits from crypt transactions are taxed on a ‘business revenue’ basis.” Otherwise, they will be taxed as “capital gains” if the primary purpose of ownership is to benefit from long-term holding through value appreciation.
If cryptocurrency transactions are reported as business income, the implications of GST legislation must also be considered.
The Income Tax Act taxes corporate revenue at income tax rates and capital gains when held as “investments” at the same rate.