Business

Cryptocurrency income should be taxed as capital gains in the following ways.

It’s vital to note that failing to report cryptocurrency trading profits or losses can result in penalties and even prosecution.

When the coronavirus pandemic swept the globe, shutting down businesses and other economic activities, the markets were filled with despair. The rise of Bitcoin, on the other hand, has served to alleviate some of the uncertainties. Even though the crypto world remained primarily uncertain and volatile, people moved to participate in this burgeoning market, and many saw their fortunes expand rapidly. There were soon requests to tax the profits made from bitcoin investments. However, there was one snag. Because cryptocurrency was not a legal tender, there were no rules or regulations governing how the income would be taxed.

This resulted in a lot of uncertainty among taxpayers. Since then, several financial professionals have explored the issue and proposed that consumers record their cryptocurrency income under the capital gains tax heading. But how should crypto trading’s capital gains tax be calculated?

Experts suggest that if a crypto asset is held as an asset, the profit or loss should be recorded as capital gains or losses. If the asset is kept for more than 36 months, the gains are considered long-term capital gains and are taxed at a rate of 20%, plus any relevant surcharges and cess. Otherwise, it should be categorised as short-term capital gains and taxed at the individual rate.

Consider this scenario: You purchased some cryptocurrency coins in April 2019 for Rs 80,000 and sold them in December 2020 for Rs 1,20,000. Because the holding period in this case is less than 36 months, short-term capital gains taxes laws will apply. You earned Rs 40,000 from the asset sale, which will be added to your taxable income and taxed according to your tax status.

Consider the following scenario: You purchased bitcoin units for Rs 80,000 in May 2016 and sold them for Rs 3,000 in December 2019. Because the holding duration exceeds 36 months, long-term capital gains regulations will apply. This income will be taxed at a rate of 20% with indexation.

It’s vital to note that failing to report cryptocurrency trading profits or losses can result in penalties and even prosecution.

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