I was going through this article on Cointelegraph on how cryptocurrencies are taxed in the United States in addition to some due-diligence for a friend who has recently moved to US and wants to know more about this stuff. Suffice to say it is more complicated than it is for us in India.
You can read that article to find the differences but I'll highlight a few key points on why it's great to be an early adopter to cryptocurrencies from India.
- Currently there is no policy on cryptocurrencies, regulating them officially.
- Lack of any law from ICAI or IT-Dept on how to file taxes on cryptocurrency income. Lack of guidelines has allowed individuals to figure out the best methods on their own. I have listed the best methods here and will write an update to it soon.
- If cryptocurrency tax laws come into effect in India, it's likely to hold you accountable for earnings after the date the law is passed. Highly unlikely we'll see a law that makes us accountable to pay high taxes (incase that's what happens in future) retroactively-meaning on past profits.
- Being an early adopter allows one to accumulate and hold wealth for the future which will help secure your future without the need to pay high taxes on cryptocurrencies accumulated in the past.
- Only profits are likely to be taxes. If you are a working professional earning in cryptos then you pay as per your income slabs. This is the current method for many and it's likely to stay. As P2P crypto transactions cannot be differentiated easily from p2p INR transfers generally. So the tax hungry government will have to strike a balance here.
- In some ways lack of strict regulations has been good so far. Taxman hasn't knocked on anyone's doors demanding cryptocurrencies so far in the last FY.
US has some complicated structures for taxation. I won't delve into it as it doesn't concern users from India. However, it's a good idea to pay taxes on our own on any cryptocurrency derived income even today. A few more thoughts are on this post.
I'm currently undergoing my tax audit and will note the changes for an update to my TheQuint article on filing taxes on Bitcoin income perhaps later this month.
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