According to the provisions of income tax, it is mandatory to file income tax return (ITR) if the income exceeds Rs 2.5 lakh or any such payment, which is TDS. In this, he has to disclose the income from any source that happened during a financial year. However, most people are confused about how to show the income from cryptocurrency in ITR, because there is no clarity in the rules about it. The Reserve Bank of India (RBI) had prohibited the holding or trading of cryptocurrencies but investors got relief from the Supreme Court last year. Even after this, there is still confusion over the nature of income from cryptocurrency, due to which there is no clarity on the tax on it.
Cryptocurrency sector is in initial stage
According to Kumar Gaurav, CEO and founder of Cashaa, the cryptocurrency sector in India is still in its infancy, so much more is yet to be done regarding terms and taxation. However, short or long term capital gains due to cryptocurrency can be taxed.
Can also show as a property
According to Gopal Bohra of NA Shah Associates, the tax liability on the income from cryptocurrency will depend on whether it is a currency or a property. Cryptocurrency is commonly used in the transaction of goods or services. In India, the cryptocurrency has not yet been recognized as a currency by the RBI and according to the Income Tax Law, it has not been defined as a currency. Therefore, it can neither be seen as an Indian currency nor a foreign currency. In such a situation, it will be seen as a property with respect to income tax and tax liability will be made on it.
Income Tax Return: These documents are necessary while filing ITR, remember; Otherwise, there will be trouble
According to Bohra, profits from cryptocurrency can be taxed as business profits, if it is achieved with the intention of profit through trading or mining and can be taxed either as capital gains, If it has been acquired as an asset.
According to Bohra, according to the current tax law, there is no clarity on the tax liability on cryptocurrencies, so there is a need for clarity from the tax department.
IT eyeing crypto income
According to CoinDCX CEO and Co-Founder Sumit Gupta, cryptocurrency is not placed in any tax bracket but the Income Tax Department can monitor the income from cryptocurrency through PAN. According to Gupta, the income from cryptocurrency can be shown under Income from other sources.
According to WazirX CEO Nischal Shetty, income from crypto trading is taxable and should be reflected in IT returns. Shetty suggests that the income from cryptocurrency should be shown in the ITR with the help of an expert like your CA.
Show crypto income by taking advice from tax advisor
Taxation on cryptocurrency is a disputed issue and can cause legal problems, according to Divakar Vijayasarthi, Founder and Managing Partner of DVS Advisors LLP. Crypto gains can be shown as income under profit from business or profession. However, if an investor has reduced investment in crypto and held it for a long time, it can be shown as income from other sources. According to Vijayasarathi, showing it as capital gains may cause legal controversy as ‘property’ is not defined under capital assets. According to Vijayasarathy, it should be treated according to other listed securities.
Presently there are many possibilities due to lack of clarity in the rules. In such a situation, how to show the income from crypto currency, it should be consulted with your tax advisor.
