Cryptocurrency is subject to taxation in various countries. Letβs explore how itβs treated in a few contexts:
United States (IRS)
The Internal Revenue Service (IRS) classifies cryptocurrency as property. This means that any profits or income from your cryptocurrency transactions are taxable. Whether you sell, trade, or dispose of cryptocurrency, you need to report and recognize any gains.
India
Cryptocurrency is categorized as a Virtual Digital Asset (VDA). If you trade or invest in crypto/NFTs, you must declare the income as capital gains if held as investments. For trading purposes, the income is considered business income.
The Income Tax Return (ITR) forms now have a dedicated section for reporting gains from crypto/NFTs and other VDAs.
Income from transferring virtual digital assets (such as crypto and NFTs) is taxed at 30%. No deductions, except the cost of acquisition, are allowed for reporting income from digital asset transfers.
Additionally, 1% TDS applies to all sell transactions of Virtual Digital Assets (VDAs) from July 1, 20224.
Staking Cryptocurrency
If you stake cryptocurrency, you may need to pay taxes on your earnings. The amount earned from staking depends on the Annual Percentage Rate (APR) offered by the validator.
Remember that tax laws can vary by country, so itβs essential to consult with a tax professional or refer to official government guidelines for accurate information. ππ°