Filing of Income Tax Return (ITR) is mandatory for people who earn a specific amount of income in a year. However, there is confusion among taxpayers over how earnings from investments in cryptocurrencies like bitcoin and Ethereum should be disclosed in the ITR.
On live Tv
Abhinav Soomaney, founder of Cryptotax International, emphasized the importance of understanding the nuances of reporting crypto earnings.
He advised investors to first prepare a comprehensive capital gains/losses report for their crypto activities.
โAfter preparing your capital gains/losses report for crypto activity, log in to the Income Tax Portal and start your ITR-2,โ he suggested.
He outlined the steps to declare crypto profits within the ITR: "Report capital gains on Schedule VDA, along with other income from cryptocurrencies. Investors must then complete the necessary schedules, proceed with verification and filing." .
Soomaney clarified that capital gains tax applies only when cryptocurrencies are sold at a profit.
Holding tokens without selling them results in an unrealized capital gain/loss, which is not subject to tax.
He highlighted several key points that taxpayers should consider:
Soomaney further highlighted various calculation methods available to investors such as FIFO (First In First Out), LIFO (Last In First Out) and HIFO (Highest In First Out). He suggested that HIFO could be the most beneficial in minimizing taxable profits.
First published: Mar 16, 2024 1:32 PM IS
