Looking for a novel source of income, a lot of people have now started to invest in cryptocurrency and are finding opportunities to earn generous ROI on it. Albeit its tremendous growth, people are worried about its taxation policies in India.
Cryptocurrency is a digital currency that acts as a medium of exchange managed and secured by cryptography. Over the last few years, cryptocurrency has gained tremendous popularity, especially Bitcoin though it has not been granted the status of legal tender in India. Guidelines for taxes on cryptocurrencies are still vague. Even though they are not mentioned in the Indian Income Tax Act and no rules are specified yet, it is mandatory to report them in income tax returns and pay tax on them.
Cryptocurrency taxes are similar to the taxes we pay on any other income realized on the sale of capital assets. The Indian Revenue System labels the taxation of cryptocurrency transactions in the Notice 2014-21 under which they are treated as property for federal tax purposes. However, this decision steered the unusual implications for the crypto owners leading to intricate tariffs. If the cryptocurrencies are traded multiple times, profit from their sale should be considered as a business income, and in the case of investment, it could be termed as capital gains.
An investment must have an income tax liability, but due to ambiguous taxation strategies for cryptocurrency, it is not wise to forgo tax on one's cryptocurrency investment gains. Consequently, it is advisable to pay Income Tax on cryptocurrency gains by comprehending the nature of the investment. If cryptocurrency is to be assessed as currency, then that particular transaction will not be suitable for taxation under ITA,1961.
In conclusion, it won't be wrong to say that India has witnessed a growth in digital infrastructure but still, taxation policy regarding cryptocurrency is vague. Thus, we must wait for government guidelines to know more details about Cryptocurrency tax.
By - Nivedita
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