Bitcoin goes way back to October 2008, when a pseudonymous person or organization named Satoshi Nakamoto published the technical outline for this new cryptocurrency. In 2009, Bitcoin became the first cryptocurrency ever created. Since then, the world witnessed a significant increase in the number of cryptocurrencies. Some cryptocurrencies are Litecoin, Ethereum, Zcash, and Dash.
Bitcoin was initially used only for private exchange for three years since its inception. WordPress became the first company major company to accept Bitcoin payments in 2012.
What is Bitcoin?
Bitcoin is one of the earliest cryptocurrencies that shaped the complex worldwide peer to peer (P2P) payment system that we know today. Cryptocurrency is digital money that can be bought and sold by cracking certain cryptographic conditions. They are supposedly more secure than real money due to complicated cryptographic functions that this system uses.
It is neither governed by a central authority nor controlled by a centralized system to monitor the transactions between users. In a nutshell, there exists no gatekeeper in such a payment system.
Bitcoin’s influence in India:
Bitcoins are becoming increasingly popular in India due to the Government’s interest in moving towards a cashless economy.
Currently, Bitcoin has neither been authorized nor regulated by the central authorities in India. Hence, there exists no concrete regulations or guidelines thus far, to navigate the possible problems that can potentially arise from the use of Bitcoins.
However, it is vital to note that Bitcoins have not been declared illegal by the Government. Bitcoin is valued very high today. If you’ve already taken the leap of faith and invested in Bitcoins, consider looking for a Bitcoin tax software to simplify the process of paying your taxes (including contractor taxes). There exists a plethora of avenues you can check while searching for your ideal Bitcoin tax software.
The most significant merit of Bitcoins is independence from political influence and centralization. However, there is no way to deal with theft or fraud because transactions are irreversible. There is no way for the banks or a central server to undo your transactions.
Taxation on Bitcoin in India:
The Government doesn’t seem to have set any tax rules on bitcoins at the moment. However, the levy of tax on bitcoins can never be ruled out given how income has always been taxed, regardless of its form. Therefore, one can only speculate.
Bitcoins that are generated by mining are considered self-generated capital assets. The sale of such bitcoins usually yields capital gains. However, it is critical to note that the cost of acquisition of a bitcoin cannot be determined as it is a self-generated asset.
Section 55 of the Income-tax Act, 1961, which explicitly defines the cost of acquisition of certain self-generated assets, does not cover self-generated assets via Bitcoin Mining. Hence we can assume that no capital gains tax would be realized on the mining of bitcoins.
If bitcoins that are held as an investment are transferred in exchange for real money, the increase in value is expected to yield long term or short term capital gains depending on how long the Bitcoin is held. Long term gains would be taxed at a flat rate of 20% while short term gains would be taxed at the individual slab rate.
Bitcoin in the USA:
Unlike India, the USA has set regulations for cryptocurrencies. Crypto assets are taxed the same way stocks are taxed. This is done per the IRS’ guide on crypto taxation. If you were to buy a bitcoin and hold it for one year, you would have to pay long term capital gains when you sell it.
Taxation on Bitcoin (or any other cryptocurrency):
Filing taxes for cryptocurrencies is known to be more arduous than filing taxes on currency or property. This mainly because Indian regulations on cryptocurrencies are amorphous. The lack of coherence in the rules has always caused a lot of confusion. Most aspects of the crypto income and profits reporting are not yet clearly defined. Consider choosing a bitcoin tax software to simplify your tax filing. There are several places at your disposal if a bitcoin tax software is what you are looking for.
Bitcoin Tax Software at Your Disposal –
It is one of the most popular tax calculators for crypto enthusiasts. This online platform allows users to import their cryptocurrency sales and purchase data throughout the year from several well-known crypto exchanges.
Zenledger is another well-known provider of tax calculation service for crypto investors. It enables users to import cryptocurrency transactions and calculate their capital gains and crypto-related income. When the transaction history is imported, this tool generates capital gains, income, donations, closing reports, profit and loss statements, and auto-fills tax forms.
Libra Tax is a universal calculator. The tool estimates capital gains and losses after analyzing the crypto-related activities of the clients. Its software connects to cryptocurrency significant exchanges like Coinbase and Bitstamp to track the client’s transactions.
Crypto taxpayers can use the Libra Tax calculator for free for up to 500 transactions. The paid subscription allows them to track 5,000 transactions. It also offers a premium service that enables the user to download tax reports.
The aforementioned tax calculators are a select few of many bitcoin tax software at your disposal. If you are a cryptocurrency investor or are planning to become one, do not forget to make use of a bitcoin tax software to simplify the otherwise tedious process of paying crypto taxes.