2017 has been the year that changed the world of Cryptocurrencies. Taking over the globe by storm, Cryptocurrency was suddenly something that every investor wanted to get its hands on, with the price of a Bitcoin touching close to $20,000 (Rs. 13,40,000). Nonetheless, the prices for Bitcoins have presently fallen, and the current price is $6000 per Bitcoin. Some of the Bitcoin owners managed to get really good returns, in spite of the mishap. Here’s a good guide on how to calculate tax on crypto gains, along with the process involved in filing it –
Trading Purposes or Investments?
According to Gautam Nayak, a Mumbai-based Chartered Accountant, based on the holdings, tax on crypto gains will vary. While talking to Livement, Nayak was quoted saying, “The first step is to see whether you were trading in it or holding it as an investment. If it is an investment, then you will have to pay capital gains tax. If you are trading in Bitcoins, it is a business income. So if your turnover exceeds Rs. 2 crores, you are liable for tax audit.” Plus, the income tax department is yet to specify the classification for crypto tradings and investments.
Adding more, Nayak Said, “You have to consider multiple factors such as duration, the frequency of the transaction, time spent on it and the intention of the transaction. All this will determine whether it is an investment or a business income.”
Investors will have to pay capital tax on crypto gains. Naveen Wadhwa, Deputy General Manager at Taxmann.com, has been quoted in a conversation with Livement saying, “Capital gains can be either short-term or long-term. There is no provision for Bitcoins and other cryptocurrencies in the Income Tax Act. In the absence of any provision, we assume the general provision will apply. Hence if you hold Bitcoins for less than 36 months, short-term capital gains will be applicable. If you hold Bitcoins for more than 36 months, long-term capital gains tax (LTCG) will be applicable.”
Filing Your Tax Returns Completely
Above all, if one has gains from selling crypto, they will have to make sure they choose the right income tax return (ITR) form. Wadhwa also has said that, “ITR1 is not for you. Depending on whether it is considered capital gains or business income, you will have to opt for ITR2 or ITR3.” He further added, “Individuals may find it difficult to calculate capital gains. Hence, you may need help from tax experts.”