by India has been a very well-performing, and enthusiastic market for Cryptocurrencies over the last decade. There are millions of retail investors and traders who pour their money into the digital assets of Cryptocurrencies and make a handsome amount of money from the trade-offs. If you are a newbie looking forward to investing and trading in the domain, here is the next big thing you need to be aware of, Taxes!
Background story on the Taxation of Crypto Gains in India
Cryptocurrencies are one the most debated and speculated technologies and investment tools that have come up in the last decade. Governments across the globe have speculated on how it will impact economies and will be used. The lack of any centralized body poses a great threat to its usage and regulations. Governments also have feared losing their firm grip on the traditional currencies which are undoubtedly the most important asset that runs the economies. Just like the whole globe, India too had a tough time discussing a midway solution that can help to regulate cryptocurrencies to a certain extent.
How does Taxation work on Cryptocurrencies in India?
The Indian government came up with the policy to introduce a crypto tax in India which is essentially an income tax imposed on your net gains from the cryptocurrency market. This policy was introduced on February 11th, 2022 as Section 115BBH Virtual Digital Assets Taxation Scheme. It states that from April 1st, 2022 a net tax of 30% will be imposed on the gains from trading, selling, or spending, along with a 1 tds on crypto sell exceeding more than ₹50,000 in a financial year. Additionally, people will also have to pay taxes according to their tax slabs if any earnings are made through the staking or mining of cryptocurrencies.
Why is handling taxation on cryptocurrencies a tedious job?
It is difficult to handle crypto tax in India because of the following reasons primarily:
- Because of the significant volatility of cryptocurrencies, it can be difficult to estimate their fair market value.
- Accurately calculating gains or losses can be difficult due to the complexity and difficulty of tracking cryptocurrency transactions.
- Confusion and uncertainty might result from the fact that cryptocurrency-related tax rules and regulations are still developing and may differ depending on the jurisdiction.
- Since cryptocurrency is frequently used for illegal activities like money laundering and tax evasion, tax authorities have a difficult time identifying and following these transactions.
- The tax ramifications of purchasing, selling, and keeping cryptocurrencies may not be completely understood by many cryptocurrency owners, which might provide compliance challenges for tax authorities.
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