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Solving Crypto Taxes in India with Cointracker

Cryptocurrency. We talk about it, we debate about it, and many have invested in it. But everyone seems to be confused about it. To put it very simply, cryptocurrencies are decentralized digital currencies meant to be used over the internet. Cryptos are vetted by blockchain technology and are largely anonymous.

In most countries, cryptocurrencies are not recognised as “currencies”(except for a rare few like El Salvador where bitcoin is a legal tender). In most places, crypto is mainly an investment or trading asset.

Cryptocurrencies in India

Like in most parts of the world, crypto fever is picking up in India. Want some proof? India has one of the highest number of crypto owners in the world. With cryptocurrencies, NFTs and Web3 becoming the next big thing, there is a lot of excitement around crypto as an asset class.

However, with buying, selling, mining, forking and other crypto activities becoming popular, the ambiguity around crypto taxes is also multiplying.

Do I need to pay taxes on my income from crypto trading? 
Do I need to report my crypto trades in my ITR?
Under which income head shall I report crypto trades? 

Can I set off crypto losses?

These questions became louder and in Budget 2022 Finance Minister Nirmala Sitharaman introduced a new Section 115BBH for tax on cryptocurrency, NFT and Virtual Digital Assets.

So what are the challenges when it comes to cryptocurrency compliance in India? Let’s find out.

  • Ambiguity regarding Tax Rates: Up until Budget 2022 there was no clarity regarding tax rates on gains from crypto. With section 115BBH coming into effect from FY 2022-23, crypto gains will be taxed at a 30% rate.
    Additionally, 1% TDS will be levied on cryptocurrency transactions exceeding INR 10,000/year.
  • Lack of support and clarity from the ITD: Even after the Budget announcement, there was little clarity regarding the income head for crypto income. While many believe that gains from crypto trading should be reported under capital gains income, others are of the opinion that it should be reported under the head Income from other sources.
    • Confusion around Income head: The confusion around crypto taxes meant many taxpayers didn’t report or wrongly reported their crypto income while filing ITR. As a result, taxpayers ended up receiving notices from the Income Tax Department. 
      Since signing up on a crypto exchange platform requires us to complete the KYC process, all the transactions are accessible to the ITD either through PAN, Aadhaar or linked bank account. Now, if you traded crypto but did not report in your ITR, the ITD can send you a notice dated back up to 8 years. 
      Although there is an ambiguity around – under which income head should crypto trading be taxed, the notice seems to consider it under the head ‘Capital Gains’. However, it is not explicitly stated under the Income Tax Act. One school of thought suggests it should be under ‘Income from other sources’, since it is taxed similar to activities such as lottery, gambling, etc.
  • P&L Report: Over the last couple of years crypto platforms have made trading and investing in crypto a lot smoother and seamless, however, there are still visible gaps in the P&L reports. 
    Crypto portfolio aggregators such as Cointracker enable crypto investors and traders to link their wallets and prepare an aggregate Tax P&L report across all domestic and international wallets and exchanges.

How does Quicko solve Crypto Compliance?

The past of couple years has ushered in increasing participation in the crypto market, especially among young investors. Consequently, we also saw an increasing request from taxpayers to simplify crypto tax compliance.

That’s when we partnered up with CoinTracker – the gold standard for crypto tax calculation – to enable all crypto enthusiasts to import crypto trades across all wallets like Binance, Coinbase, WazirX, CoinSwitch, CoinDCX, OpenSea, and many more within a click.

With CoinTracker, you can import your trades from all your crypto wallets. CoinTracker’s proprietary tax engine will calculate cost basis across all your holdings. From there, you can download Tax P&L statements in seconds. You can then upload your P&L statement on Quicko and we will read, calculate, and help you report your capital gains. Who knew that being compliant even when it came to crypto taxes could be this easy?

So dear crypto enthusiasts, we are here to take taxes off your plate so that you can keep your eyes on the market.

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Got Questions? Ask Away!

  1. @Latesh_Bayad, there are two schools of thought for taxes on crypto, some believe it should be taxed as capital gains and others believe it should be considered as income from other sources.

    If the cryptocurrency is held as an Investment and being exchanged for Fiat Money it may be treated as capital gains.
    There are some articles which you might find useful

  2. Hey @Shama,

    The taxability of Cryptocurrencies arises under Income from Capital Gains if it is held as investment or trading. The cryptocurrency shall be considered as a Capital Asset and the taxability shall arise in the hands of person owning the same.
    In Your case, since, Person A is owner of the cryptocurrencies; so any gains arising from sale of cryptocurrencies shall be taxable in the hands of Person A as the data/KYC registered with exchange is that of Person A. It shall make no difference if the proceeds are received in Joint Savings A/c which is held along with Person B.
    Person B shall ignore the same proceeds in his ITR as Person A is paying the taxes in his ITR.

    Hope it helps!

  3. Avatar for Nireka Nireka says:

    Budget 2022 brings taxes on Crypto, NFTs and other Virtual Digital Assets

  4. Hi @Murali_Krishnan_S, if you are receiving profits in India then you will be taxed at 30% + 4% HEC and if you are receiving profits outside of India, then they are not taxable in India. You can also go through the blog attached below which will help you how the new budget affects you crypto trading and profits. Let me know if you need any further clarification. :blush:

  5. Irrespective of my tax slab ; crypto is taxed @30% . ?

    I mean if my income is zero and i made profit from crypto trading Rs. 1 lakh ; i pay tax 30,000/= ? Or i’ll get STGC excemption of 1 lakh ?

    Or crypto is taxed 30% based on my tax slab ?

    In this case ; if my income is 5 lakhs including 1 lakh income from crypto trading ; i declare crypto income in first slab which is taxfree upto 2.50 lakh !

    What is the rule ?

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