Cryptocurrency Taxation in India: How to Avoid the Cryptocurrency Tax?
Cryptocurrency has gained immense popularity in recent years. With its soaring popularity, many people have started investing in cryptocurrencies such as Bitcoin, Ethereum, Ripple, and many others. However, many investors are not aware of the taxation laws that apply to cryptocurrency in India. In this article, we will discuss how to avoid cryptocurrency taxes in India.
Understanding Cryptocurrency Taxation in India:
Cryptocurrency taxation in India is governed by the Income Tax Act of 1961. According to the act, any income earned through cryptocurrency trading or investing is subject to taxation. The income tax department considers cryptocurrency as an asset, and any profits gained from it are considered as capital gains. The capital gains tax in India is categorised into two types – short term capital gains (STCG) and long-term capital gains (LTCG).
Short term capital gains is applicable when an asset is held for less than 36 months. The tax rate on short term capital gains is equivalent to the investor’s income tax slab rate. Long term capital gains, on the other hand, is applicable when an asset is held for more than 36 months. The tax rate on long term capital gains is 20% with indexation benefits.
Ways to Avoid Cryptocurrency Taxation:
- Hold Cryptocurrency for Long Term: To avoid short term capital gain tax, investors can hold their cryptocurrency for more than 36 months. By doing so, they can avoid paying short term capital gains tax and only pay long term capital gains tax if they decide to sell their assets.
- Gift Cryptocurrency to Family Members: According to the Income Tax Act, gifts received from family members are not subject to taxation. Therefore, investors can give their cryptocurrency assets to their family members to avoid taxation.
- Invest in Offshore Cryptocurrency Exchanges: Many offshore cryptocurrency exchanges do not require investors to pay taxes on their profits. By investing in these exchanges, investors can avoid paying taxes in India.
- Claiming Losses on Cryptocurrency Investment: In case an investor incurs a loss on their cryptocurrency investment, they can claim it as a capital loss. The loss can be set off against other capital gains or carried forward for the next eight years.
Cryptocurrency taxation is still a relatively new concept in India, and the tax laws surrounding it are continuously evolving. Therefore, it is crucial for investors to stay up to date with the latest developments like there are many best crypto tax software being introduced which makes it a lot easier than to seek professional advice to avoid any tax-related issues. By following the tips mentioned above, investors can avoid cryptocurrency taxation in India and maximise their profits.
If you are looking for a crypto tax software for yourself in India then, I will recommend you to use Binocs. Binocs is one of the best crypto tax software available in India which will make your crypto investment very smooth. By using Binocs you will not need to check for the tutorial. It will do a lot of work for you and will help you in doing your investment in crypto.