How do Crypto Organizational Investors File IT Returns in India?

Crypto organizational investors are also subjected to the crypto taxation in India

The crypto industry in India has flourished since digital assets were first introduced in the country. According to reports, the crypto industry grew over 39 percent over the past few years. India has the most number of investors when it comes to digital assets which also made the country rank among the top nations with the highest cryptocurrency adoption rate. India has one of the largest growing crypto markets in the world, with several world-renowned cryptocurrency companies, exchanges, and blockchain development startups that are ready to deliver the best services to the global market. As more and more young Indian investors wished to explore newer investment options, they were also adopting cryptocurrencies such as Bitcoin, Ethereum, and Polygon to make investments that promise viable returns. Reportedly, retail investors in India have invested US$6.6 billion in crypto assets, which is evaluated to reach US$15.6 billion by 2030. The Indian crypto industry, alone, had the potential to add immense value to the global market and enhance its economic and financial significance. But currently, the digital asset market in India is in turmoil. The introduction of cryptocurrency taxes has disrupted the normal functioning of the market.

As of the new financial year of 2022, the Indian Government has imposed new crypto regulations that instruct the investors to pay a capital gains tax of 30% on cryptocurrency transactions, along with an additional 1% TDS tax on buying and selling cryptocurrencies, as well as on crypto gifts, with no ability to take deductions for losses. This decision by the government has caused an uproar in the industry and among crypto business leaders. Institutional crypto investors in India will also be subjected to these taxes and will face severe consequences if they do not abide by these rules. Even though the NFT domain is flourishing, this impending fear about financial losses also prevails in the NFT marketplaces. To miss any crucial points would mean that the investors would have to face legal fines. So, investors, especially organisational crypto investors should be careful while conducting ITR filing in India. 

How to file for ITR under current circumstances?

There are several ways through which investors can earn profits from cryptocurrencies. Some mine it, some buy or sell it, and some earn profits by solving cryptographic equations with the use of high-power computers. Be it as many options as possible, there could be an 'income' on such holdings and hence they are all subjected to taxes. 

An institutional and general taxpayer would have to report transactions related to cryptocurrency as business income if held as stock in trade, or capital gains if held as investments. The cryptos, when purchased from exchanges outside of India, can be considered a foreign asset and can be liable to be reported in ITR as a foreign asset. If the investor is exchanging one cryptocurrency with the other, that can also include a tax incidence.

Besides this, investors have to calculate their total gains made via crypto holdings, staking, farming, and ICOs and specify them to the business income. Gains from crypto assets need to be reported under special income under the 'Income from Other Sources' part, and there will be a different ITR form for this. And loss from crypto investments will not be subject to deductions in the tax rate. They will also be liable to pay taxes on the net profit made in the financial year, and the TDS taxes should also be kept in mind as a whole while trading securities on the exchanges.

Bottom line

Investing in crypto assets in India has become more like a turmoil than an expectation for profits. After the introduction of these regulations, several investors have put their wallets on hold, and have sworn off the market until any clarification is issued by the government. In a nutshell, it is quite evident that the government is trying its best to discourage its citizens from relying on virtual assets or even investing in them. 

Disclaimer: The information posted in the article is for educational purposes only. By using this, you agree that the information does not constitute any investment or financial advice. Do conduct your own research and reach out to financial advisors before making any investment decisions.

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