According to the provisions of the Income Tax Act, an assessee – having an annual income of more than Rs 2.5 lakh or who has received any installment on which tax was deducted at source (TDS) – necessities to document Income Tax Return (ITR), uncovering all the earnings.
However, there is disarray among numerous on how the earnings from investments in digital forms of money should be uncovered in the ITR as there is no clarity on it. In India, the cryptocurrency is in the beginning stage. A ton regarding guidelines and taxation should be finished. Cryptocurrency earnings should be taxed as a short or long haul capital gain based on the duration they were held as an investment.
Indeed, the Reserve Bank of India (RBI) had prohibited holding or holding cryptocurrencies in India. The RBI ruling, however, was put aside a year ago by the Supreme Court, clearing the route for investments in cryptocurrencies in India.
Yet, because of the confusion, the idea of earnings from investments in cryptocurrencies has not been characterized at this point. Thus, there is no clarity on the taxation of such earnings. Tax Implication on any profit or gain emerging from holding CryptoCurrencies will rely upon its nature whether it is a currency or property. By and large, cryptocurrencies are utilized for the trade of products or administrations. Presently in India, cryptocurrencies are not perceived by RBI as cash and likewise, income tax law additionally doesn’t characterize it as a currency. In this way, cryptocurrencies cannot be regarded as currency neither an Indian currency nor a foreign currency. Consequently, for the purpose of income tax, it will be viewed as property, and tax implications will be similar if one is holding any other property. As such the profit or gains emerging from cryptocurrencies either can be taxed as a business profit if the equivalent is obtained with the expectation to make a profit by trading/mining or a capital gain if the equivalent is procured with the goal to create wealth.
In absence of any clarity, the tax implications are discussed based on the existing tax law, however, specific clarifications are required from the tax department. In ITR form disclosure of the profit or gain arising from cryptocurrency transactions need to be disclosed on the basis of the position taken by the taxpayer i.e. whether a capital gain or business profit,” said Gopal Bohra NA Shah Associates. However, it won’t be legitimate to not uncover the earnings generated from cryptocurrencies, essentially on the grounds that there is no clarity on taxation.
While cryptocurrencies have not been categorized under any tax bracket, so far. But the Income Tax Department can monitor earnings of cryptocurrency investors that are registered through KYC/AML compliant exchanges, with the help of PAN. The number of earnings generated by investing in cryptocurrencies may be highlighted under ‘Income from Other Sources said Sumit Gupta, CEO and co-founder of CoinDCX.
The taxation of cryptocurrency is a contentious issue and would definitely be prone to litigation. As on date, the Income Tax Act does not deal with the taxation of cryptocurrency explicitly. In this backdrop, based on the available guidelines in determining the nature of income, the common perception is that crypto gains are speculative incomes and shall be disclosed under the income under the head profits and gains of business or profession,” said Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP.
“However, those who have transacted minimally and have held the cryptocurrency for a longer duration may disclose the income under the head income from other sources, in order to avoid litigation. Disclosing the same under capital gains shall be prone to litigation since the term “property”, under the definition of a capital asset, is not defined, and considering the same as a capital asset is contentious however we feel that they should be treated at par with other listed securities. The taxation of cryptocurrency, at present, is a blind spot with different possibilities until the government clarified its stand unequivocally.
Any earnings you make from crypto trading are taxable like any other income and should be declared in the IT returns. However, we advise our users to consult with experts like Chartered Accountants on how to declare these earnings in ITR. I also believe that crypto regulation will bring more clarity to this as we’ll understand how crypto is classified and taxed in India,” said Nischal Shetty, CEO, WazirX.
For more information, visit the website of All India ITR