Crypto enthusiasts searching for a new crypto asset to invest in are nowadays are waiting for the Central Government of India to introduce Cryptocurrencies d Regulation of Official Digital Currency Bill 2021 in the parliament.
This is why you must know about Income Tax Treatment related to the tax on Income from digital decentralized currencies.
Income Tax Treatment about income from cryptocurrencies is divided in two different parts.
- General Treatment
- Tax on income from cryptocurrency activities like mining, staking, airdrops and forking.
This post will guide you about the General Treatment whereas the next concept will be explained through the next post.
Following are governed by the ITA (Income Tax Act) 1961:
- Levy tax.
- Tax administration.
- Tax collection.
- Tax recovery.
The government agency responsible for taking care of the four points mentioned above is known as the Income Tax Department of India. It is answerable to the CBDT (Central Board of Direct Taxes) for everything.
This government agency is an integral part of the MFDR (The Ministry of Finance Department of Revenue). MFDR is responsible for direct collection of taxes.
Tax authorities in India do not seem to have issued any clear circular on tax from income through decentralized digital currencies and activities related to it.
The List of Activities Related to Cryptocurrency:
There is lack of clarity on the legality and tax treatment of decentralized digital currencies. Despite this, some experts consider income from such a financial technology and relevant activities taxable.
If tax experts are to be believed, tax laws in India are applicable and the legal status of income does not matter in this case.
Application of tax would continue despite ban on cryptocurrency. The tax authorities of India would continue chasing unaccounted or untaxed income through cryptocurrency or relevant deals.
The Indian Ministry of Finance’s Office of the Deputy Director of Income Tax has been communicating with the Indians asking questions related to their dealings related to cryptocurrency and relevant activities.
According to some experts, such notices are issued when someone has concealed or is likely to conceal a specific income.
Therefore, assesses are advised to analyze and the nature and the manner in which the decentralized digital currencies are held.
- It could be considered as a Capital asset chargeable to CGT (Capital Gains Tax) after sale.
- If it is held as stock-in-trade in business’s regular course.
In such a scenario, your income from cryptocurrencies and relevant activities could fall in the category of business income. This business income is chargeable to tax under the head of profits and gains from business or profession.
There is a period of holding for classification. This is something you must know about if you are searching for a new crypto asset to invest in. This period could be up to 12 months. It depends on two factors:
- Holding classification for long term
- Holding classification for short term
This is something that your must know about Income Tax General Treatment rule in India about income from cryptocurrency and relevant activities.
In case you are looking for a new crypto asset to invest in India, learn in this regard as much as possible for taking the right decision.
Keep coming back to our website to learn more about it. Our next post will now guide you about income tax rule of India.
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