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.
If you like my work kindly resteem it to your friends. You may also continue reading my recent posts which might interest you:
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Good article! ....... I find flying under the radar is a good strategy!!!
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Thanks. I concur :)
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Nice article @firepower. I was willing to know how to withdraw by Steem/SBD earnings in India. Any inputs will be appreciated.
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You can do it by selling it for BTC on Binance, then send btc to Wazirx, Giottus, Instashift or other p2p type exchange in India and follow steps to cash out and more recently @swapsteem p2p exchange as well.
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Thanks a lot for sharing those details.
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I stay in point 5 and go with the tax slabs in India
In US it's too complicated as you mentioned and they do not consider "point 5" like we have in India at present. The US taxation IRS considers the crypto as property and have defined a separate property taxation rules for crypto. If we are confused, there are always tax consultants ☺️
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Yeah. Tax consultants, many in India are clueless about cryptos in general. They'll catch up eventually.
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Indian government does not consider cryptocurrency as a legal tender so question of tax does not arrive. It would be good for crypto lover in India if government consider crypto as legal tender and apply the taxation rule.
It will also help crypto exchange in India to do business and survive.
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Good point but if they choose to ban it then your income derived remains taxable. Infact, as per law any income whether done through legal or illegal means is taxable, also whether there is an appropriate law or not for it in India. Therefore we have to pay taxes on any gains from speculation even now or on sale. :)
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This is actually what we are looking for and thanks again @firepower for sharing good content which is really helpful.
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I'm glad it was useful. :)
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It would be good if some official policy with regard to cryptos is adopted in India.
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Since the ban, i have been thinking to collect cryptos, open an account in US when i visit in future, cash it out.
But sounds like a dumb idea now
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Currently there is no need to do anything like that. P2P or OTC trade is always an option that should and in all likelihood remain open to us in India.
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yeah hoping so, P2P is easy but risky.
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Congratulations @firepower!
Your post was mentioned in the Steem Hit Parade in the following category:
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India is big on "Blockchain", but the way the government is treating open public decentralised cryptocurrency hints that they dont really like those things.
Regardless, "taxing" on crypto profits can only come into play when fiat money is involved. For example, its hard to tax your earned steem if you got them via upvotes.
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Indian government cannot tax STEEM earned until we sell that STEEM for INR currency and it gets deposited in our bank account, then that amount is taxable in India. However, in other countries, they may or may not technically require their citizens to show when they earned that cryptocurrency and at what rate they earned it. Our government is ages behind on anything crypto.
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It's unfortunate that any of our capital gains are taxed. There are multiple stories of people here in the USA who made a huge profit on crypto, and then they lost it when crypto crashed However, they still owe the taxes on the profit with no way to pay it. Isn't that insane? That's how ridiculous our IRS is here.
None of our income should be in my not so humble opinion. There are places like Costa Rica that have zero tax on capital gains no matter how they were made. Then there are places like Puerto Rico with the Act 20 and Act 22 new laws that can make your total tax rate only 4%!
Some places are definitely better than others, and I've been researching this specific issue for years to find the best place to relocate to or at least have as a backup option. What are you other taxes in India? How much do you get taxed on your regular job's income? How much is your total estimated taxes when you add everything up?
Here in the USA it is about half my income, and that's not including the worst tax of them all: inflation.
Thanks in advance for your reply, and it's good to see you again, @firepower!
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