How to calculate tax on cryptocurrency:The central government is seriously considering taxing cryptocurrencies. So, if you are investing in crypto currency, you need to know how these digital currencies can attract tax!
Cryptocurrencies such as Bitcoins and Ethereum are popular worldwide and have already invested billions in these digital currencies. Although they have no physical existence, they operate on the principle of blockchain technology. The central government is taking many steps to address the cryptocurrency that people are interested in cryptocurrency around the world.
How to calculate tax on cryptocurrency
If you too are interested in cryptocurrencies, you should know a few things. The central government is seriously considering taxing cryptocurrencies. So, if you are investing in crypto currency, the key question is how these digital currencies can attract tax. So, here is information on how the government can tax your cryptocurrency investment.
This effort has taken place not only in India but also in most countries in the world on taxation of cryptocurrency. Financial experts and officials are planning to design tax rules for cryptocurrencies. Thus, no one can escape paying tax on the profits of cryptocurrencies.
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The Reserve Bank of India (RBI) has banned cryptocurrency trading in banks and other financial institutions in 2018. However, in 2020, the Supreme Court ordered the repeal of the RBI ban. Since then, investment in cryptocurrency in India has been increasing.
Although there is no prohibition on the trading of virtual currencies in the country, it is not yet legal. In the meantime, taxation on cryptocurrencies is being debated at the highest level. If this works, no one can escape paying taxes on cryptocurrencies.
In India, there are no specific guidelines on the taxation of cryptocurrency in the Income-tax Act, 1961. But, if the taxpayer has invested in cryptocurrencies and has benefited from those investments, transactions need to be reported. Taxes must be paid for profits earned from cryptocurrency.
As recently as last March, Union Finance Minister of State for Finance, Anurag Singh Thakur, responded to a question in the Rajya Sabha saying, “Profit from the transfer of cryptocurrencies / assets is taxable under the head of Revenue.
However, there are still many ambiguities regarding the terms and conditions of cryptocurrency. If cryptocurrencies hold for more than 36 months, your return is classified as long-term capital gains. However, short-term gains are classified as short-term capital gains. These profits are taxed at different rates. Percentage on long-term profit. 20 are subject to tax. Short-term gains and other benefits are taxed at individual tax rates.
Can a crypto transaction be classified as a commercial activity?
Any profit that a trader earns from a cryptocurrency transaction falls into commercial income. This income is taxable. If cryptocurrencies are held as ‘stock-in-trade’, the income from them is also taxable. Thus, you should be aware that your income is taxed as you do daily crypto trading and earn income.
So, when dealing with cryptocurrency, remember that you have to pay tax on all the income you earn. You must maintain records of all your transactions. Take the help of a tax expert to guide you on this.
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