The Way Governments Can Tax Crypto Investments



Cryptocurrency like Bitcoins, Ethereum, et al., is a variety of decentralized digital money. Connected to a network of computers, they function on the principle of blockchain technology. People around the globe are taking interest in cryptocurrency. If you’re one of all those curious about cryptocurrencies, you would like to know the assorted aspects of it. And therefore the question of how cryptocurrencies can attract tax is the maximum amount valid if you’re staring at investing. So, have you ever ever considered how the govt. can tax your cryptocurrency investment? Discover the varied ways within which it will be done.

Concerned authorities around the world are going to design standard rules of taxation for cryptocurrencies. There’s no shake paying tax on the gains from cryptocurrencies.

As far as India is anxious, in 2018, the bank of India (RBI) had banned banks and other financial institutions from facilitating cryptocurrency transactions. In 2020, the Supreme Court reversed the order. Since then, though trading is allowed on these virtual coins, they need not yet received the status of a monetary system. However, paying tax on cryptocurrency trades does not spare anyone.

In India, there aren’t any specific guidelines on the taxation of cryptocurrency within the Income-Tax Act, of 1961. But taxpayers must report transactions if they need to invest in cryptocurrencies and gained from those investments.


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Should you classify cryptocurrencies as ‘currency’ or ‘asset’?

When you discuss cryptocurrencies, there’s still lots of ambiguity as far as rules and regulations around the same are concerned. If your cryptocurrencies are held for over 36 months, your gain is going to be categorized as long-term capital gains. But your gains from a shorter period of your time are categorized as short-term capital gains. These gains are taxable at different rates. At a rate of 20 percent, the long-term gains are subject to tax. The others, however, including those where gains are received during a shorter period of your time, are subject to tax at the applicable personal taxation rates.

Can crypto-trading be often classified as a business activity?

If a trader carries out cryptocurrency transactions often, any cash in on there would be taxable as business income. If cryptocurrencies are held as ‘stock-in-trade,’ the income arising from there’ll also attract tax.

Therefore, while you’re continuously trading in cryptocurrencies, you want to know that the profits you gain are taxable as business income

So, while managing cryptocurrency, remember that you simply must pay your tax if you’ve got generated an income. Secondly, you need to maintain a record of all of your transactions. Most significantly, take the assistance of a taxation expert to guide you thru.


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