Digital assets are digital currencies, payment systems, and legal tender in certain exceptional circumstances. New use cases are developed every day, and they’re always changing. They are decentralized and not controlled or governed by any government. Continue?

Cryptocurrencies, an unstable asset class with many elements that remain unidentified and are among the most volatile. This year, India’s interest in cryptocurrency reached new heights with several new start-ups and crypto exchanges entering the market for crypto.

Due to the lack of a law, standard brokerages in India aren’t able to offer this service. Join these exchanges and fill out your KYC to begin trading in tokens.

Is cryptocurrency considered to be a “currency’ or an ‘asset’?

Tax experts are debating whether cryptocurrencies should be classified ‘as an asset’ or ‘as a currency’. asset’. The terms cryptocurrency and market are often used in conjunction.

In order to identify it as a currency, the government needs to provide legal support. If that isn’t present, it’s safe to classify as an asset/property.

Since tax implications will arise regardless of legality so naming them “assets” could be more effective than waiting for a government explanation.

As the tax implications will result regardless of whether they are legal the best option is to label them “assets” instead of wait for an explanation by the government.

Additionally there is the fact that the US government has also issued an announcement naming it a ‘property,’ implying that capital gains taxes will be levied on profits on the selling of cryptocurrencies.

Why should crypto gains be taxed?

At every stage of the development of the internet, laws and regulators have lagged behind technology. The same holds true in India which has regulations moving to allow individuals invest in crypto and banks transfer money into the crypto market.

The Reserve Bank of India (RBI) has announced that trading in digital currency is permitted, but has cautioned investors about the hazards.

How do you prepare and complete your crypto tax?

It is never too early in preparing your tax returns for crypto. In the form 1040 that you normally fill out, you will be asked if you have used virtual currency during the tax year. If yes, remember the following:

1. Keep accurate records of all transactions

Keep records of the transactions you made with your cryptocurrency. This includes how much the amount you paid in addition to the length of time you held it or how much it sold for. Also, you will receive receipts for every transaction.

If you have crypto, your crypto exchange may issue you a 1099B, but it won’t include the cost basis for your crypto, or the price you initially paid for the crypto.

2. Complete the required tax forms

Once you’ve compiled a log of every cryptocurrency exchange, you will need to fill out tax forms that are specific to how you used your crypto.

*8949 is the formula to use. The form tracks every transaction you make to purchase or sell cryptocurrency. Include the amount of coins you purchased, the amount and date on which they were bought, as well as the date and the price that they were sold, as well as the profit or loss on each transaction.

The final schedule on the list is Schedule D. This form will calculate your total capital gains as well as losses for all of your assets including cryptocurrency.

* Appendix A. If you’ve earned bitcoins from mining then you need to specify whether they were used for your company or as an interest. If you run a cryptocurrency mining company, you may owe self-employment taxes.

3. Prepare an annual tax return

Connect your tax software online to WazirX in case you use it to monitor your exchanges. They provide a complete range of accounting and tax services to keep track of and prepare your regular and crypto taxes to those who are looking for a one-stop-shop.