Millions of Indians have nested their eggs in cryptocurrencies. The credit goes to a rapid increase in the value of Bitcoin.
Millions of Indians showed interest in cryptocurrencies to achieve their financial dreams during the COVID-19 pandemic. Their income increased by manifolds.
This grabbed the attention of the Central Government, RBI (Reserve Bank of India), and the Income Tax Department of India. The government has introduced a taxation policy to regulate cryptocurrencies.
Various types of taxes have been imposed. The entire Indian cryptocurrency community is busy finding loopholes for relief from this hefty financial crackdown on their gains.
You will have to learn about some important concepts explained below:
How Your Income From Crypto Becomes Taxable In India?
- Sale and purchase of crypto.
- Transactions involving cryptocurrencies.
- Gains from cryptocurrency.
- Cryptocurrency received as a gift.
- Expenditure or allowance.
- The income you earn from the transfer of VDA (Virtual Decentralized Asset).
- Transfer of cryptocurrency.
Read More: Learn These 9 Terms Before Investing In Cryptocurrency in 2022
Various Taxes Applicable On Cryptocurrency In India?
The Central Government of India charges many taxes. All these taxes apply to the crypto transactions listed above.
Take a good look at the list of taxes on cryptocurrency in our country.
- Sales tax
- 1% TDS (Tax Deducted on Crypto).
- Gift Tax
- 28% GST (Goods and Services Tax).
- 30% Capital Gains Tax
Steps To Avoid Tax Payment On Income From Crypto In India
All crypto enthusiasts in India want to know about it. They are constantly exhausting Google and other search engines with queries about it.
Nirmala Sitharaman, The Finance Minister of India, imposed a flat 30% tax on all types of gains from the sale of VDAs (Virtual Decentralised Assets). This includes cryptocurrencies too. She announced it during the Union Budget Session of 2022.
The minister also declared 1% TDS (Tax Deducted At Source) on all cryptocurrency transactions.
The Indian cryptocurrency community has noticed some loopholes in the bill. DEX (Decentralised Exchanges) like PanCakeSwap and Uniswap and P2P (Peer-to-Peer) transactions can help avoid taxes on crypto in India.
Is this going to work? Are these methods risk-free? These are two-million-dollar questions.
DEX stands for Decentralised Exchanges. Decentralized crypto exchanges do not require KYC.
The element of complexity in the roots of these decentralized tools and exchanges is hard to crack. The entire risk is borne by the investor only.
Only you are responsible for everything.
Also Read: Is Cryptocurrency a Good Investment? Let’s Decode It
What Happens After You Convert Your Crypto Gains To FIAT?
You will still have to pay your share of the tax. The income tax department of India already knows about the possibility of these tricks.
The trick could work in traders’ and investors’ favor for some time. However, sooner or later, the government of India will take care of this trick.
This could be a risky trick from a financial perspective. Using DEX may not work in the long run because crypto is not legal tender despite introducing a relevant taxation program.
Process To Report Cryptocurrency on Your Taxes In India:
You can report income from crypto on your taxes using one of the ways mentioned below:
You will need the following set of documents for this purpose:
- The proof of income.
- Form 26AS.
- Form 16A.
- PAN Card.
- Aadhar Card.
- Capital Gains Statement.
- Bank Account Details.
Do not forget to report your losses and exemptions. The government of India does not seem to be in the mood to spare your losses in crypto. You may not be allowed to offset your losses.
What If You Avoid Tax Payment On Crypto In India?
Do not make this mistake. Be a wise person and be in the good books of your government and the tax department in India.
There is a list of consequences for failing to file an ITR and report income from anything in India. The list includes the following:
- hefty financial penalties.
- Legal proceedings against you.
- 1% percentage monthly interest.
- Late filing fee.
- You may be ineligible to carry forward or offset certain losses.
- Jail term for two months to two years.
We advise you to be wise and report your crypto income because crypto is not a legal tender yet.
The information given in this content should not be considered legal, financial, or tax-related advice from any perspective.
We advise you to talk to an experienced tax planner familiar with taxation practices and cryptocurrency to help you make the right choices and decisions to move in the right direction.
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