Income Tax Return filing For Crypto Currency , Bitcoin

Now a days with digital era many individual make investment in Crypto currency and some of do trading in Crypto Bitcoin. Many of companies have made it official that they will accept payment in Crypto. In India taxation of income of Crypto was in grey area. There was confusion about tax payers about taxation of Crypto Bitcoin in India. Profit eared from investment or bitcoin trading is taxable in India. for individuals earning a specified amount of income in a year. We need to understand Cryptocurrency taxation India with below examples.

Tax Guideline for Crypto currency , Bitcoin

Income or profit derived from sale of crypto currencies or bitcoin can be classified as either capital gain or as business income. Income tax department allows you to report Crypto currency , Bitcoin income in your income tax return and pay applicable taxes.

Capital Gain on Crypto currency

As regular person invest in listed companies stocks at certain price and sell shares after certain time. This is called as capital gain. Same principle applies in case of Crypto currency.

Legal Definition

In view of Section 2(14) of the Income-tax Act 1961, a capital asset means a property of any kind held by a person, whether or not connected with his business or profession. The term ‘property’, though has no statutory meaning, yet it signifies every possible interest which a person can acquire, hold or enjoy.

Therefore, bitcoin could be deemed as capital assets if they are purchased for the purpose of investments. Its important to note that tax payer is making investments in bitcoin and not making day-to-day trading in bitcoin. The Capital Gain on Cryptocurrency need to be classified as short-term or long-term capital gain.

S.No Particulars Capital Gain Tax Rate
1 Investment lesser than 36 months Short Term Capital Gain
2 Investment More than 36 months Long Term capital Gain

Tax on Professional Income received in Crypto currency

Now a day Crypto is new currency. Earlier companies uses to pay professional in dollars in international market. Now a days few of companies started paying professional fees in Crypto currency or bitcoin. For example Mr. A form India work given services of website designing to XYZ Inc for $ 100 and in return company given Mr. A bitcons as professional fees. Mr. A uses an Indian Bitcoin exchange plat form such as CoinSecure.in etc. and convert it to INR. On amount converted in INR tax as per your income slab will apply. For income > 10 lac then tax at 30% shall be applicable.

Tax on Trading of Crypto currency , Bitcoin

As like share trading now a days some person prefers doing trading in Crypto currencies. Many Crypto currency platforms offer to trade of bitcoins. Bitcoin trader with substantial and frequent transactions it could be considered as a business (trading) income. For income tax filing purposes frequent trading of bitcoin shall be treated as business income.

For Example

Mr. A who earns from trading of Crypto currency. For financial year 2021-22 he trading in bitcoin as below and value of 1 Bitcoin in say INR 10000/-
S.No Particulars Amount
1 sales of Bitcoin 1000
2 Purchase of Bitcoin 600
Profit 400

Profit from Bitcoin trading shall be treated as business income of Rs. 40 Lac ( 400 Bitcoin * 10000). For Tax payer need to select ITR Form 3 for reporting profit of Trading from Crypto currency.

There are number of complicated difficulties involved for filing and reporting income tax return for income from Crypto currency , Bitcoin. If any individual or company wish to start earning from digital currency then you should you must be aware of the various securities and commodities, fraud , money transfer, financial, corporate and tax laws. We A N Bhutada & Co work provide consultancy for income received from Crypto currency , Bitcoin . We safe guard clients tax return filing.