Cryptocurrencies are digital currency as well as payment systems and legal tender in certain unusual scenarios. They are always evolving, with new use cases being developed on a regular basis. Decentralized, they are not governed or controlled by any government. Cryptocurrencies, which are an unstable asset class with many elements that remain unidentified and are among the most volatile. In the past year, India’s interest in cryptocurrency reached new heights with an array of start-ups and crypto exchanges launching into the crypto market, click for source!
In India, digital currencies can be bought from particular crypto exchanges. conventional brokerages have not yet offer this service due to an absence of laws. Register with these exchanges and complete your KYC to begin trading with tokens.
What’s the difference between cryptocurrency and an asset?
Tax experts are debating if cryptocurrency should be classified as an asset’ or ‘as a currency’. asset’. The terms crypto and cryptocurrency market are often used interchangeably.
However, identifying it as a ‘currency’ requires government legal approval; in absence of this, it is safe to declare it an asset/property.’
Since tax implications will take place regardless of legality, designating them as “assets” would be a better method than waiting for a government explanation.
Since tax implications will be a matter of law, designating them as “assets” could be an alternative to waiting for an explanation from the government.
In addition, the US government has issued a statement designating it as property, implying that taxes on capital gains are imposed on gains from the sale of cryptocurrency.
Why should crypto gains be taxed?
Laws and regulations lacked technology in every phase of Internet development. In India the regulations are slowly changing to allow the retail investor to be a part of cryptocurrency, and banks to deposit money into the cryptocurrency market.
The Reserve Bank of India (RBI) has indicated that trading in digital currency is allowed, however it has cautioned investors about the hazards.
How do you complete and submit the crypto tax?
You can never be too early when preparing your crypto tax returns. The regular Form 1040 tax return has a new inquiry about whether you’ve used virtual currency during the year. If you said yes, you should remember the following:
1. Keep accurate records of all transactions
Keep an eye on all your cryptocurrency transactions, including the amount you spent on it, the length of time you held it for, or the amount you sold it for, and also the invoices for each of them.
If you own cryptocurrencies, the crypto exchange you use will issue you a 1099B, but it won’t include your cost basis, or the amount you originally paid for the cryptocurrency.
2. Completing the required tax forms
It is necessary to fill in specific tax forms that reflect how you used your crypto, once you’ve kept track of the exchanges you made:
*8949 is the formula to use. This form tracks each time you purchase or sell cryptocurrency in exchange for an asset. This should include the total quantity of coins that you have, the date and amount that you bought them, the date and price at the time you sold them as well as the amount of profit or loss on each transaction.
The last schedule on the list is Schedule D. This form will calculate your total capital gains as well as losses for all your investments including cryptocurrency.
* Appendix C. If you have earned coins from mining, you must state whether you obtained them as a result of a business or for a hobby. If you run a cryptocurrency mining company, you may owe self-employment taxes.
3. How do I file a tax return
If you are using WazirX to track your exchanges, you are able to join them with your online tax software of your choice. These platforms offer a broad range of accounting and tax services to manage and prepare both your tax returns for normal and crypto transactions for individuals searching for one-stop shop.