Indian government does not recognize cryptocurrency in its payment system; however, that doesn’t mean the investors can go out of tax radar. Indeed there are no provisions made for digital currency in the Indian tax system but the government officials have been mandated to work on the same so that no Indian citizen can escape out taxes.
According to Quartz, the Indian income tax department did a survey on a number of cryptocurrency exchanges in December 2017 to understand their approach. It was then found that about 500,000 investors have not paid their taxes related to the income from crypto trade. All such investors have been issued notice by the tax department.
Along with this, the Reserve Bank of India has instructed all financial institutions to prohibit cryptocurrency until their further notice. The government is said to be working on a regulatory draft of the crypto trade which is likely to get ready by the end of September 2018. But, the investors are in a dilemma over the tax return filing and showing their profits on the crypto trade. Find out ahead how the investors can proceed.
Individual Cryptocurrency Investors
As per the income tax department instructions, the profits generated from cryptocurrency will be declared as capital gains or state profit. Therefore, these are going to be considered within capital gains taxes which are later bifurcated into short and long-term gains as per the time period. Another safer option is to declare them as income from other sources which gets added to the salary or business income.
In case of traders, the income generated is considered as the amount earned from the business. However, if the total earning is beyond Rs 2 crore then a separate tax audit is required. Though, the expenses related to office maintenance and administration can be deducted from the overall costs.
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