Crypto Taxation Rules in India
In India, the cryptocurrency industry is thriving. With an increasing number of investors and users, the government has seen its fair share of crypto-related issues, including crime, tax evasion, and money laundering, to name a few. One such problem that has plagued Indian citizens is determining whether or not an individual’s holdings are taxable.
The Income Tax Act of 1961 contains all of India’s tax laws. To tax an individual’s income and assets, the Indian Income Tax Department (ITD) employs a variety of strategies. These rules, however, are not exactly crypto-friendly.
The cryptocurrency portfolio has been classified as a capital asset by the ITD. This means they see Bitcoin as an investment rather than a currency. The capital gains act requires you to pay taxes on the difference between the sale price and the cost price of an asset or property (i.e., purchase price). It also views mining as a business activity and levies taxes on mining profits accordingly.
As previously stated, India does not have any cryptocurrency-specific legislation. The ITD rules also make no mention of cryptocurrencies, despite the fact that they may be involved in the transaction. Indeed, the government has taken a neutral stance toward cryptocurrencies and has even issued guidelines for the new technology.
Consult this overview of Income Tax rules and regulations to learn how income is taxed under the Indian Income Tax Act.
In India, cryptocurrency taxation is on the rise.
Due to the NIL (No information linkage) requirement, cryptocurrency tax evaders can easily conceal their transactions and holdings. A mandatory KYC (Know Your Customer) report is required to determine and capture such transactions and holdings in taxation records.
According to Section 132(I) of the Income Tax Act, any citizen who transacted an aggregate amount of Indian Rupees 5 lakhs or more during a fiscal year is required to file an income tax return. This includes earnings from cryptocurrency trading.
This law also states that all taxpayers who have failed to file their tax returns on time will be given a three-month grace period before their names are published and information about them is made public. This is why cryptocurrency investors are rushing to file their tax returns before the end of the fiscal year (March 31 2018).
Furthermore, transacting in any property with no KYC records is considered tax evasion under Section 271AA. This Act applies to anyone who fails to provide his or her PAN number to another person.
India’s Tax Evasion
Because cryptocurrency taxation in India is currently unregulated by the government, there is little the Indian government can do to combat the use of cryptocurrencies for money laundering. As previously stated, it is only listed as a capital asset and not as an independent currency.
Evaders of Crypto tax in India make a killing by concealing their transactions and holdings as NIL. Because cryptocurrency users and exchanges are anonymous, the government believes they are unlikely to be caught.
The Indian government has formed a task force of 2,000 people to combat cryptocurrency tax evasion. As part of its efforts in this area, the government is reviewing its income tax rules and regulations in order to establish a proper framework for cryptocurrencies and their taxation procedures.
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