How To File Income Tax Returns For Cryptocurrency Income In India?

Cryptocurrency trading is far from being easy. While you may rake in a lot of moolah when the prices are running bullish, you have to keep a lot of legal considerations in mind all the time: regardless of whether or not you are earning any profits out of cryptocurrencies. The problem gets particularly complicated in case of countries like India, which still don’t have any comprehensive set of regulations to deal with the issues surrounding cryptocurrencies. That said, you probably do not know how to file income tax returns on cryptocurrency income in India. Today, let’s find out.

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Since the government of India is still mulling over how to legally regulate virtual assets, most chartered accountants in India apply their own understanding as far as reflecting crypto income in tax returns is concerned.

Keeping most chartered accountants’ opinions in mind, the following are the ways in which individual investors can file their crypto income as a part of their tax return filing.

Crypto In Tax Returns: For Individual Investors

In India, chartered accountants reflect income from cryptocurrency as a part of the capital gains tax.

Basically, crypto income is treated just like income from property, equity or income-generating assets similar to them. That is why, the capital gains tax is applied to this class of assets.

Depending on your total income slab, your crypto income will be taxed as a capital gain. How long you have been holding the asset also matters.

If it is a short term investment and you have been holding it for less than 36 months (3 years) then you will be taxed at a higher rate compared to what you will be taxed for a long term investment.

For example, if your annual income is over 10 lacs and you have short term capital gain from crypto, you will be taxed at a rate of 30%. With the same annual income, if you have a long term capital gain from your crypto assets, then you will be taxed at the rate of 20%.

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When you are an individual investor, then you must fill up the ITR2 form very carefully, stating your crypto income and reflecting the tax deductions accordingly.

Crypto in Tax Returns: For Traders

For all businessmen and traders invested in cryptocurrencies, the crypto income will be treated as capital gain in a business or a HUF (Hindu Undivided Family). The rules are fairly similar to those applicable to an individual investor but the rates can potentially vary.

Moreover, traders must remember to fill in the ITR3 Form. Consulting a chartered accountant is advisable for all crypto users, even though it is only compulsory if you cross the 2 crore market.

Having an expert give you specific advice will help you tackle the problems of using crypto in an unregulated environment.

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Raghav Sawhney

Raghav is a significant contributer who uses his knowledge, skills and experience towards development & growth of the organisation in an efficient and effective manner.