More than 1,500 digital currencies, like Bitcoin, Ethereum, Dogecoin, Cardano, Polkadot are being traded in the financial world today. No doubt the profit collected by their trade has increased the investment and trading volume of cryptocurrencies in the last few years.
However, while trading in this Immediate Profit App you must know that you need to pay your tax if you have generated an income by trading cryptocurrencies and this profit will be taxable as business income.
You must also note to maintain a record of all your transactions in an accurate manner so as to avoid any confusion during the calculation of your gains and losses at the time of filing tax.
Cryptocurrencies are capital assets. Just like other capital assets, you are liable to pay taxes when you earn profit at selling your cryptos, just the same as in the case of traditional investments, such as stocks. Similarly, like other kinds of investment, if you sell your crypto in loss or when its value has fallen, you can claim a capital loss. Hence, till any further rules and policies are laid out by the government, crypto investors must pay income tax based on the nature of the crypto transactions.
Calculation of the taxes on capital gains is determined by the period for which the owner has held their crypto. In case it is less than 12 months, you will be charged tax at the rates of short-term capital gains. Whereas, if it’s one year or more than that, tax rates will be applied as long-term capital gains.
Things to keep in mind if you’re performing crypto transactions
If you are engaging in any sort of digital currency transactions, Here are some important points that you must keep in your mind:
- Maintain Proper Records of All Your Transactions
It is very important to keep a record of all your transactions in crypto, which includes the payment you made for crypto, the time period for which it was held as well as the amount you received by selling it. You must keep proper receipts for all the transactions that you perform.
- Try consulting a taxation expert to guide you through
As cryptocurrency laws and policies are constantly evolving, it can be complicated to prepare for crypto taxes. If you are earning a significant income from the crypto market, it may be worth hiring a tax expert to avoid any kind of legal discrepancies.
- Crypto-assets can be noted as ‘ income from other sources ‘
While filing ITR, Crypto assets can also be written under the head ‘ income from other sources ‘ and hence taxed accordingly. Total income also takes into consideration, the Income from. Thus it also taxable.
- 4. A gift of crypto is treated exactly like other gifts
Gifted cryptocurrency is also taxable as any other gift. The tax on it will be based on its value.
- Donating crypto to a qualified tax-exempt charity or non-profit:
If you donate crypto directly to a charitable organization, you may claim a charitable deduction.
- Converting one crypto to another is also taxable
When you use one crypto to buy another, for example, Bitcoin to buy Ethereum, you will have to sell your bitcoin before buying a new asset. And as this is a sale, you’ll have to pay taxes if you sold your bitcoin for more than you paid while buying it.
- Implication of Goods and Services Tax
If crypto transactions are recorded as business income, the GST law (Goods and Services Tax) is also considered.
Final Words
If you are dealing with cryptocurrency, you must remember the fact that if you have generated an income from it, you are liable to pay your tax. And if you avoid paying your crypto taxes, even if it’s a small amount, you could end up getting into legal troubles and incurring costly penalties.
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