RBI has not given legal recognition to cryptocurrencies, but cryptocurrency transactions are not illegal in their country. In such a situation, it is important to understand how cryptocurrency gains are taxed.
Investor interest is increasing.
Cryptocurrency tax rules: The Reserve Bank of India has not yet given legal recognition to cryptocurrencies in their country (RBI on Cryptocurrency). Despite this, investor interest in it is increasing. The number of cryptocurrency investors is increasing day by day. It is being rapidly accepted at the global level as well. Those who invest in cryptocurrencies do not know what are the tax rules regarding this.
Due to the lack of legal recognition of Cryptocurrency, the Income Tax Department is also not saying anything about the tax related rules. However, tax experts say that cryptocurrency investors should absolutely not make the mistake of not paying tax on the earnings from it. According to tax experts, except the income which has been exempted in the Income Tax Act, every type of income comes under the purview of tax. Accordingly, the income earned from cryptocurrencies also comes under the tax net. Experts say that cryptocurrency investors should pay tax on the earnings from their mind keeping in mind the investment nature.
Business Income or Capital Gain?
In a report published in Mint, Amit Gupta, managing director of SAG Infotech, says that if an investor trades in cryptocurrencies, then he should deposit tax on the earnings from it as business income. If he has invested in it, then tax should be deposited on the basis of capital gain.
How will capital gains tax be levied
Amit Gupta says that if an investor has invested in cryptocurrencies and redeems it before three years, then it comes under short term capital gains tax. The tax rate of STCG is 15 percent. If the investment is redeemed after 3 years, then it comes under Long Term Capital Gain (LTCG). LTCG is 20 per cent, but investors will get the benefit of indexation.
Cryptocurrency transactions not illegal
Pankaj Mathpal of Optima Money Managers says that even though the Reserve Bank has not legalized cryptocurrencies, cryptocurrency transactions are not illegal in their country. In such a situation, the investor will have to prove whether the income from this is business income or asset class income. Considering it an asset, capital gains tax is levied. Experts are also advising that the income earned from this can be considered as income from other sources and tax can be deposited accordingly.
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