Advocate P M Mishra, Additional Director, Finlaw Consultancy discusses about the probable tax liability on Crypto Currencies in India
New Delhi [India], December 11: (ANI/SRV Media): If you are an Indian, the hard truth is that you’re dealing with one of the most comprehensive tax systems in the world by default. But now, if you use crypto at all, it’s twice as complicated. If you have engaged in any of the following activities, you have few additional considerations to include in your annual accounting like: Traded crypto in an exchange, earned crypto from mining, received crypto as a gift or inheritance, used a foreign crypto exchange, invested in or issued an ICO or STO or IEO, running your own exchange or having your own token or coin, registered company abroad and running your Crypto business.
Hopefully, by now, you’ve already enlisted professional help to prepare your taxes. Including what you need to report, what you owe, and which forms you need to file for your crypto activities. Obviously, each person’s tax situation is very unique.
Advocate P M Mishra, Additional Director, Finlaw Consultancy, discusses a few pointers where Crypto users must be extra careful & need to maintain each detail for reporting. He commented saying, “In the last few months, we received a few cases where clients even received law enforcement agencies’ notices related to Crypto transactions. Few guys believe that how will the income tax department ever know that you have Crypto? Actually, it’s a lot easier than you think. If you’ve traded more than X amount or made over X number of transactions on a Crypto exchange, regulators require the exchange to report your activity directly to them.”
On top of that, thanks to public distributed ledgers and subpoenaed documents from Crypto exchanges, it is very simple for tax authorities to trace every single transaction one has made. The days of crypto exchange anonymity are over. With heightened KYC AML and the rise of chain analysis companies, it is easier than ever to connect wallets to the people behind them.
Basically, don’t think your activity is private. It’s not. Choosing not to report your Crypto transactions may land you with a variety of penalties. This includes criminal prosecution, some years in prison, and fines of up to X amount may be considered by the government in the near future.
If one has crypto then be ready to pay tax reporting for following activities in India –
1. Foreign Account Reporting: Have you used a foreign exchange or foreign-based wallet in the last year ? If so, chances are that you have a few more forms to fill out.
2. Crypto tax requirements for transactions: If it comes under asset Category then, given the differing capital gains tax rates for long-term vs. short-term holdings, these two methods can give you slightly different tax obligations.
3. Crypto tax requirements for investments: When it comes to Crypto investments as opposed to Crypto transactions, things get even trickier. Imagine if you want to use crypto in lieu of fiat to make a loan. Let’s say you want to lend 100 Bitcoins at 10 percent interest. Theoretically, your transaction should result in a capital gain of 10 Bitcoin. Thus, you should be liable for taxation on that amount.
4. Crypto as gifts or inheritance: Crypto received as a gift follows the standard rules of all major gifts.
5. Taxation of ICO/STO /IEO/ DeFi investments: Crypto taxes for STO investors. In the case of STOs, it’s clear that the tokens are sold as part of a securities offering. As a result, these tokens can be classified in the same way as traditional securities. For ICOs, let’s assume their tokens are considered ‘goods’. This means they do not qualify as securities offerings. As a result, issuers may be liable for income tax from the moment the initial sale of tokens takes place.
One of the biggest challenges facing Crypto today is regulatory uncertainty. Unsure of the law and how it applies to their projects, many Crypto entrepreneurs are hesitant to take action. After seeing other projects fined hundreds of thousands of dollars for being out of compliance in the USA , they are understandably nervous about making the same mistakes. To check out more, check: