Cryptocurrencies have experienced a meteoric rise in the last few years, rising from nothing to becoming a $300 billion industry. As such, cryptocurrencies and investment opportunities are becoming more prominent in India. However, certain complications with cryptocurrency taxation and government regulations make the process of filing crypto taxes much different from traditional tax filing methods. In order to help crypto investors navigate this complicated area of Indian law, we have compiled this comprehensive guide on cryptocurrency taxation in India . Read on for our top tips!
What is the need of understanding crypto law?
As an aspiring investor in the field of digital assets, understanding how your fiat currency is classified under Indian law can give you everything you need to know about how much tax you should be paying. The Indian government currently has no specific laws or regulations which say that cryptocurrencies are either legal or illegal. As such, you will be subject to the same legal framework and taxation as any other financial asset.
Is Crypto Currency Taxable In India?
Consider your cryptocurrency holdings as stocks of a company in which you have invested, and your holdings in fiat currency as your bank account. Both are taxable assets which you need to accurately report to the tax authority, with the reward being the knowledge that you have paid every rupee on what you earned.
This guide on cryptocurrency taxation in India is intended to help you understand your responsibilities as an Indian citizen or resident in regards to taxes on crypto exchange. We will cover all the important income tax aspects of crypto taxation and how they differ from traditional assets, as well as some basic questions you should ask yourself before investing in a crypto asset.
When You Will Need To Pay The Tax?
If you are going to exchange one cryptocurrency for another, then you have to pay tax based on the fair market value which is essentially the same as the fair market value of any other asset. The difference being that cryptocurrencies are prone to fluctuations in value and thus investors must take the average exchange rate for both of these periods and use that as the fair market value for calculating gains or losses from crypto transactions.
What Is The Process Of Paying Crypto Taxes?
The process of paying taxes remains essentially the same in both situations with two exceptions, one being that if you exchange a cryptocurrency for fiat currency (i.e selling it directly), then you can deduct any selling expenses directly from your taxable income i.e. if you paid an increased commission for selling your crypto due to market fluctuations, you are allowed to deduct that amount from the total value of your crypto at the time of sale.
How To Calculate Crypto Tax On Exchange?
Calculating Crypto exchange manually may be frustrating. As there are many technicalities involved in calculating crypto taxes. If you hire a person to calculate your tax then it will cost you a good amount of money. Instead of hiring any person for work, using a crypto currency tax software will help you to solve your problem. I will recommend you to use Binocs, which is the best tax software for crypto in India. Its clean interface will never give you a hectic feel and will enhance your trading experience.
