Made A Profit From Trading In Crypto! Here’re The 6 Things You Need To Know

First and foremost, we must remind you that the government has recently extended the timeframe for filing income tax returns for the fiscal year 2020-21 to September 30 and individuals with an income of more than Rs 2.5 lakh are required to file income tax returns (ITR) under the Income Tax Act. Many Indian investors have turned to digital currencies in the expectation of generating quick money, but they are unsure how to report their gains. As a consequence, while you as a crypto investor may have profited lavishly, you may be perplexed as to how these profits can be reported in your IT return. Cryptocurrency gains, according to tax professionals, are taxable. These earnings are categorized as either capital gains or business income. So, let's talk about how cryptocurrency profits should be reported on an ITR form.

How gains from Cryptocurrencies are taxable?

1. While filing an ITR, earnings from cryptocurrencies can be stated under 'Income From Other Sources.'

2. The period of holding will be taken into consideration while calculating the tax on cryptocurrencies. Long-term capital gains (LTCG) are taxable if investors hold cryptocurrencies for 36 months or longer, while short-term capital gains (STCG) are taxable if they hold for less than 36 months.

3. Short-term capital gains (STCG) are taxed at the taxpayer's slab rate, whereas long-term capital gains are taxed at a rate of 20% with indexation.

4. ITR-2 and ITR-3 should be used to file tax returns for individuals who have capital gains or business income from cryptocurrencies.

5. Individuals with taxable income over Rs 50 lakh are required to fill out Schedule AL in ITR forms, which covers details regarding mutual funds, securities, and cryptocurrencies.

6. Moreover, if you have a dearth of transparency on crypto taxation, it is wise to discuss with your tax expert before disclosing your crypto gains on ITR forms.