All ready to calculate your own crypto tax on your crypto assets investment or trading? Keep continuing reading Calculate Crypto Tax on Investing and Trading. Let’s go further and decode the crypto tax formula.
Investing in cryptocurrency and trading cryptocurrency are two very different things. Trading is purchasing and selling crypto assets on a frequent basis in order to generate a profit from the price shift that occurs over a short period and then repeating this activity frequently. On the other hand, investors can choose to invest for the short or long term. As the name implies, these investors could keep an asset for a short period or a more extended period, but the goal is to trade often.
The buying and selling of derivatives, including futures and options, are considered trading, not investment.
How to Figure & Calculate Crypto Tax as an Investor
The length of time that an investor keeps an investment makes them distinct from one another.
Less than thirty-three and a half months: The short-term capital gains tax
Gains on Capital Acquired in the Short Term tax brackets are based on the total income a person has earned in a given fiscal year from the sale of invested assets that have been held for less than three years since their acquisition. The tax rate relevant to other incomes generated during the year is the tax rate that applies to the Short Term Capital Gains.
Profit equals the selling price, less the acquisition cost and any commission or brokerage fees.
Ownership of an asset for more than 36 months: Long-Term Capital Gains Tax
If the investor sells the asset (or assets) three years after its acquisition, the Long Term Capital Gains Tax will be applied to the profit (or profits). The long-term capital gains tax rate is a flat 20 percent.
In this situation, the taxpayer also enjoys the benefits of indexation.
An investor might gain insight into the current value of the item under evaluation by using the Cost Inflation Index. The purchase cost can be interpreted as the asset’s present value. Because of this, the taxable profit is reduced to some amount.
The level of the Cost Inflation Index remains the same and unchanging across the board for all of the capital assets. This is because no indexes are tailored to the particular characteristics of individual types of investments.
Only in the context of LTCG ( Long term capital gains tax ) may the Cost Inflation Index be discussed.
Profit is Sales Price less Cost of Acquisition plus Commission or Brokerage Fees plus (Cost inflation index multiplied by Cost of Acquisition).
Calculate Crypto Tax as an trader
Earnings that are subject to taxation are those that may be attributed to taxable activities.
Trading may be considered the same as conducting a commercial firm or endeavor. This results in an increase in revenue for the company.
When you profit from a transaction, you must record it and record that profit in your books as soon as possible. Then, perform the computation using the price from the same day to ensure that the fluctuation in price does not lead to any misunderstandings.
If, over the course of a few days, you bought Bitcoin, sold Bitcoin, and earned a profit of 100 Indian Rupees (INR), the tax rate that applies to your transaction might be anywhere from 0 to 30 percent, depending on your total income.
As we all Indians know seriousness to follow government rules with paying taxes as a true Indian citizen. So, for your ease, I have something very handy that can actually help you to calculate all crypto taxes automatically without any hassle! Believe me, It will make your “Calculate Crypto Tax” thing easier than ever!
The Bottom Line
You might now got the basic idea of what and how to Calculate Crypto Tax in India weather if you are trading or investing for short term or long term. Well, Investement in any assets comes in slabs and it cost of tax varies but in crypto trading you are bound to pay flat 30% tax to the government of India as latest rules have made.
Still wanna know more about Crypto Tax and its various terms and condition then do check other article on CryptoSharX.
Bitcoin Halving: A Solid mechanism for security and Survival of Blockchain 2022
Crypto.com gives a lady $7 million instead of a $68 refund, and she uses the money to purchase a home.