India’s largest tax filing platform, Cleartax, is attempting to simplify the country’s currently complex tax policies regarding cryptocurrency.
Having the legal framework to tax virtual currency revenue in an accessible way for cryptocurrency investors is fundamental to the ongoing process of legitimizing the currencies in the mainstream.
One of the factors preventing a more widescale adoption of cryptocurrencies is the lack of accessible information regarding the legality and practicality of cryptocurrency holdings and profits. Indeed, each country has different legislation regarding this if there are any policies in place at all. The government in India refuses to recognize cryptocurrencies as legal tender but has not regulated the industry nor denounced it as illegal.
Despite this lack of implemented regulations, the formal taxation policy requires cryptocurrency investors to pay taxes on their earning. In December 2017, the income tax authorities of India visited and surveyed the nine largest cryptocurrency exchanges in the country to ensure there was no tax evasion occurring. The surveys were conducted under the rights of section 133A of the Income Tax Act, which the government states is applicable regardless of the legality of Bitcoin.
The outcome of these visits found USD 3.5 billion worth of transactions having been conducted over a 17-month period via the exchanges. The income tax department proceeded in issuing tens of thousands of tax notices to investors. The report produced from the surveys also found the industry was adding an estimated 200,000 participants in India every month.
Despite the ambiguity from the government of India on cryptocurrency regulation, it has clearly stated if you are profiting from cryptocurrency holdings, taxes must be paid on them:“[W]e aim to clear the air around [the taxation of] digital currencies”.
Cleartax founder and chief executive Archit Gupta recently spoke out on the collaboration with cryptocurrency exchange platform Zebpay, outlining their plan to assist investors with filing taxes on their virtual currency profits.
Their Cryptocurrency Taxation Advisory service intends to educate taxpayers on the taxation laws surrounding cryptocurrencies. The additional service for Tax Filing For Gains From Cryptocurrency is also available on their website. The services are accessible to both businesses and individuals profiting from virtual currencies.
In recent months the Indian authorities continued to freeze bank accounts belonging to cryptocurrency exchanges, muddying the water further for those with cryptocurrency holdings. Despite the collaboration between Cleartax and Zebpay, without official policies from the government, there remains a lack of clarity for those in India profiting from cryptocurrency holdings.