Solutions on How to file Tax returns on Bitcoin Income

[Virtual miner]

So, I have seen a lot of people asking questions regarding the Taxability and disclosure requirements about their Bitcoin Income. As we all know the return filing date is coming. So I would suggest you with ways of disclosing your bitcoin or other cryptocurrencies Income earned in Financial year 2018-19.

Remember to save yourself from hazzles only pay taxes on cryptos which you have redeemed in Bank. Anything held on exchanges such as Koinex, Bitbns, WazirX still counts as crypto assets not sold. So you don't need to pay tax on that. Pay TAX on "₹" That you have received in your bank account only.

So, there are a list of sources as to how you can earn your bitcoin Income:
1. Earnings from Signature Campaigns, Bounties & other Services Rendered.
2. Earnings from Regular day trading profits.
3. Earnings from Crypto Investing(Crypto brought before 2018 but sold in 2018).
4. Earnings from any other source.


1. For Bounty Hunters and Signature Campaigner: If you have earned any income from such sources and redeemed it on an Indian exchange. Its better if you show yourself as a Digital Marketing Agency and file your return under Profits and gains from Business. In this way you will be able to take advantage of "Presumptive Income Scheme" in which you can declare your total earnings and even subtract some expenses such as Internet Cost, Electricity cost etc. better ask your CA regarding it. So if you have earned received for eg. ₹200,000 in form of Receipts from signature campaigns you can deduct some expenses and file a return under 44ADA.

2. For Regular day trading profits.: If you are involved in regular trading of cryptocurrencies and have redeemed something in bank Account then you need to pay taxes on it. Remember don't Disclose this income under Capital Gains. You have to disclose this once again under profits and gains from Business but you can't opt for presumptive Income Scheme. Just ask your Accountant to make you a profit and Loss with Balance Sheet and file your return by paying tax at normal Slab Rates.

3. Earnings from Crypto Investing: If you have sold some crypto assets throughtout the year like merely 15-20 transactions with their profits its better you disclose such profits under Capital Gains. Remember you must have brought Cryptocurrencies using bank account to disclose income here. You can just show your sales Receipts minus the Purchase payment and pay tax on profit as short term capital gain.

4. Earnings from any other source: In general I don't think there is any other source of earning. Even if you have earned something from giveaways or something just show it under your income from other sources showing it as "CRYPTO RECEIPTS". Pay tax at normal slab rates.

I think I have covered all the major sources of crypto earnings. If you have any other query a PM is always welcome

[1714985087]

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[1714985087]

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[1714985087]

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[avikz]

 

For Bounty Hunters and Signature Campaigner: If you have earned any income from such sources and redeemed it on an Indian exchange. Its better if you show yourself as a Digital Marketing Agency and file your return under Profits and gains from Business. In this way you will be able to take advantage of "Presumptive Income Scheme" in which you can declare your total earnings and even subtract some expenses such as Internet Cost, Electricity cost etc. better ask your CA regarding it. So if you have earned received for eg. ₹200,000 in form of Receipts from signature campaigns you can deduct some expenses and file a return under 44ADA.

Section 44ADA of Indian Income tax act says that certain professionals as mentioned under section 44AA(1) will only have the benefit of declaring their income under section 44ADA. Now section 44AA(1) says,

(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette' shall keep and maintain such books.

Now lets look at the books to be maintained to get the benefits of 44ADA -

– Cash book;
– Journal;
– Ledger;
– Carbon copies of the bills and receipts issued by the person in relation to sums exceeding Rs.25;
– Original bills and receipts issued to the person in respect of the expenditure incurred.

If an individual is earning from signature campaign, such books can't be maintained! It's best to show the income under "Income from other sources" and pay taxes accordingly!

Information source: https://studycafe.in/2013/07/section-44aa-persons-required-to-maintain-books-of-accounts.html

[Virtual miner]

For Bounty Hunters and Signature Campaigner: If you have earned any income from such sources and redeemed it on an Indian exchange. Its better if you show yourself as a Digital Marketing Agency and file your return under Profits and gains from Business. In this way you will be able to take advantage of "Presumptive Income Scheme" in which you can declare your total earnings and even subtract some expenses such as Internet Cost, Electricity cost etc. better ask your CA regarding it. So if you have earned received for eg. ₹200,000 in form of Receipts from signature campaigns you can deduct some expenses and file a return under 44ADA.

Section 44ADA of Indian Income tax act says that certain professionals as mentioned under section 44AA(1) will only have the benefit of declaring their income under section 44ADA.

Absolutely right that this benefit is only available to people notified U/S 44AA(1)

Now section 44AA(1) says,
(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette' shall keep and maintain such books.

Yes this is what is written under 44AA(1) which says any other profession as notified by board in official gazette which has notified Information Technology Services. Signature campaign and digital marketing( The broad domain of bounty hunters) falls under this category.

Now your interpretation of 44ADA is horribly wrong. It only takes out the notified services from 44AA(1) not the clause of maintaining books of account, it contradictaly states that

Section 44ADA(4) Notwithstanding anything contained in the foregoing provisions of this section, an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (1) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

In layman terms this means that one who is not obeying 44ADA has to mantain books of accounts as prescribed by you here

– Cash book;
– Journal;
– Ledger;
– Carbon copies of the bills and receipts issued by the person in relation to sums exceeding Rs.25;
– Original bills and receipts issued to the person in respect of the expenditure incurred.

And if we say that even people opting for 44ADA and 44AB have to maintain books of accounts then the whole presumptive income scheme becomes a joke.

Source: http://www.icnl.org/research/library/files/India/IndiaIncomeTax1961.pdf  

Alternatively showing it under other income sources may make such income more prone to scrutiny by Income Tax due to unclear disclosure while no one doubts on a digital marketing business that easily.

[savioroshan]

When I contacted an auditor regarding paying tax, she told me to consider the earnings from crypto as normal earnings( income from other sources) and pay tax according to that and last year I did the same. I didnt have any issue because of it.

[Virtual miner]

When I contacted an auditor regarding paying tax, she told me to consider the earnings from crypto as normal earnings( income from other sources) and pay tax according to that and last year I did the same. I didnt have any issue because of it.

There is no issue in filing it in other sources as of now. Even filing it under salary won't attract you any type of problem. But what I am trying to give is the best opinion so that you do not have to face any legal scrutiny in future. When you are rendering services such as signatures they become part of profession if you are not having any other business income. So filing it there would even allow you to take deduction of expenses and pay lesser tax. You can even take deduction of expenses under other source but that can lead to some scrutiny.

Remember there is no law as to how to file it so all of these are best judgement opinions. Alternative methods can be opted Obviously.

[avikz]

For Bounty Hunters and Signature Campaigner: If you have earned any income from such sources and redeemed it on an Indian exchange. Its better if you show yourself as a Digital Marketing Agency and file your return under Profits and gains from Business. In this way you will be able to take advantage of "Presumptive Income Scheme" in which you can declare your total earnings and even subtract some expenses such as Internet Cost, Electricity cost etc. better ask your CA regarding it. So if you have earned received for eg. ₹200,000 in form of Receipts from signature campaigns you can deduct some expenses and file a return under 44ADA.

Section 44ADA of Indian Income tax act says that certain professionals as mentioned under section 44AA(1) will only have the benefit of declaring their income under section 44ADA. Now section 44AA(1) says,

(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette' shall keep and maintain such books.

Now lets look at the books to be maintained to get the benefits of 44ADA -

– Cash book;
– Journal;
– Ledger;
– Carbon copies of the bills and receipts issued by the person in relation to sums exceeding Rs.25;
– Original bills and receipts issued to the person in respect of the expenditure incurred.

If an individual is earning from signature campaign, such books can't be maintained! It's best to show the income under "Income from other sources" and pay taxes accordingly!

Information source: https://studycafe.in/2013/07/section-44aa-persons-required-to-maintain-books-of-accounts.html

I am withdrawing the above quoted post! OP is absolutely correct! I just had a discussion with my CA regarding my tax filing this year and he suggested the same! I am going to file my crypto earnings under 40ADA this year! There are some major benefits as explained by my CA,

1. 40ADA is specifically mentioned for few professionals and freelancing is one of them.
2  Accounting not required
3. Straight away deduct 50% from your total earnings as expenses
4. Audit not required

Go ahead with 40ADA if you are earning in cryptos from freelancing or from signature campaigns.

[playboy654]

It helps a lot,but I am not earning much of bitcoins and converting it into INR so still I need to pay income taxes?

[avikz]

It helps a lot,but I am not earning much of bitcoins and converting it into INR so still I need to pay income taxes?

If you have earned more than 2.5 lakh in the last financial year, you will have to file income tax return. This does not mean you will have to pay tax but you have to let the government know how much you have earned! But if your total income is less than 2.5 lakh, then you don't have to file the return as well!

Here total income means your bitcoin earnings plus your offline earnings! Hope this helps!

[playboy654]

It helps a lot,but I am not earning much of bitcoins and converting it into INR so still I need to pay income taxes?

If you have earned more than 2.5 lakh in the last financial year, you will have to file income tax return. This does not mean you will have to pay tax but you have to let the government know how much you have earned! But if your total income is less than 2.5 lakh, then you don't have to file the return as well!

Here total income means your bitcoin earnings plus your offline earnings! Hope this helps!

Ofcourse I got more than 2.5 lakhs but I thought it is only necessary to do when we hit 5 lakhs per annum.

[avikz]

It helps a lot,but I am not earning much of bitcoins and converting it into INR so still I need to pay income taxes?

If you have earned more than 2.5 lakh in the last financial year, you will have to file income tax return. This does not mean you will have to pay tax but you have to let the government know how much you have earned! But if your total income is less than 2.5 lakh, then you don't have to file the return as well!

Here total income means your bitcoin earnings plus your offline earnings! Hope this helps!

Ofcourse I got more than 2.5 lakhs but I thought it is only necessary to do when we hit 5 lakhs per annum.

That is for the current financial year! So next year you won't have to pay income tax if your income doesn't exceed 5 lakhs. But currently we are doing taxes for last financial year i.e. FY 18-19. So for this year, the old rules apply!

Also we don't yet know if we don't have to file income tax return or not for upto 5 laks income! It is possible that the rule for filing income tax return remains unchanged, only the tax burden will be calculated based on 5 lakhs!

[webtricks]

It helps a lot,but I am not earning much of bitcoins and converting it into INR so still I need to pay income taxes?

If you have earned more than 2.5 lakh in the last financial year, you will have to file income tax return. This does not mean you will have to pay tax but you have to let the government know how much you have earned! But if your total income is less than 2.5 lakh, then you don't have to file the return as well!

Here total income means your bitcoin earnings plus your offline earnings! Hope this helps!

Ofcourse I got more than 2.5 lakhs but I thought it is only necessary to do when we hit 5 lakhs per annum.

That is for the current financial year! So next year you won't have to pay income tax if your income doesn't exceed 5 lakhs. But currently we are doing taxes for last financial year i.e. FY 18-19. So for this year, the old rules apply!

Also we don't yet know if we don't have to file income tax return or not for upto 5 laks income! It is possible that the rule for filing income tax return remains unchanged, only the tax burden will be calculated based on 5 lakhs!

The basic exemption limit is still Rs. 2,50,000. Government has increased rebate through Section 87A which provide additional deduction upto Rs. 12,500  from total tax liability if income is between Rs. 2,50,000 and Rs. 5,00,000. So yes, even if your tax liability is zero, you have to file nil return if your income is above Rs. 2,50,000. The exemption from filing return is only available if total income is below Rs. 2,50,000 for individual below the age of 60. If the age of individual is above 60 or 80 then the exemption limit is Rs. 3,00,000 and Rs. 5,00,000 respectively.

[Stedsm]

Does anyone of you guys know a reliable CA to get my taxes filed? I've got 2 CAs in contact but they don't know shit about BTC and what they know is all negative, so they speak the same - that ye ho jaega and wo ho jaega, jail ho jaegi, chhod do abhi ke abhi band kardo or kuch dusra kaam shuru kardo.

They try to scare people a lot based on what they know aur in CAs (Ch*tie Albelo) ko lagta hai ki ye Bhagwan hi ho gae BTC ke (limited to those 2 I'm talking about, to sab CA Dil pe mat le Lena). It's like these 2 guys - don't have the capacity to even chew popcorns in their mouth and talk like they can break walnuts under their @$$.

I know this is an old topic and was not touched since long, but this information is necessary for me at the moment, so to manage someone to keep my accounts.

[eaLiTy]

Does anyone of you guys know a reliable CA to get my taxes filed? I've got 2 CAs in contact but they don't know shit about BTC and what they know is all negative, so they speak the same

This is a problem you will face when you are approaching a CA who does not have any knowledge about BTCitcoin and all they know about is from the media and it is hard to make them understand, all you need to tell them is to file the income you earned from BTCitcoin as income from short term capital gains depending on the amount or you can file under income from other source, these depends upon the amount of money you are getting in your bank account, the rest i will explain in TG on how i filed the taxes so that you will get an idea on how to proceed.

[sector-32]

This might help for your CA. https://cleartax.in/s/bitcoin-tax-calculator

[akram143]

Does anyone of you guys know a reliable CA to get my taxes filed? I've got 2 CAs in contact but they don't know shit about BTC and what they know is all negative, so they speak the same

This is a problem you will face when you are approaching a CA who does not have any knowledge about BTCitcoin and all they know about is from the media and it is hard to make them understand, all you need to tell them is to file the income you earned from BTCitcoin as income from short term capital gains depending on the amount or you can file under income from other source, these depends upon the amount of money you are getting in your bank account, the rest i will explain in TG on how i filed the taxes so that you will get an idea on how to proceed.

But? When RBI issued ban on crypto related transactions,filing the taxes using the bank account statement might let us in the risk of getting account freezed right?

[avikz]

Does anyone of you guys know a reliable CA to get my taxes filed? I've got 2 CAs in contact but they don't know shit about BTC and what they know is all negative, so they speak the same

This is a problem you will face when you are approaching a CA who does not have any knowledge about BTCitcoin and all they know about is from the media and it is hard to make them understand, all you need to tell them is to file the income you earned from BTCitcoin as income from short term capital gains depending on the amount or you can file under income from other source, these depends upon the amount of money you are getting in your bank account, the rest i will explain in TG on how i filed the taxes so that you will get an idea on how to proceed.

But? When RBI issued ban on crypto related transactions,filing the taxes using the bank account statement might let us in the risk of getting account freezed right?

No! There is no provisions made in the tax return form to show your crypto earnings! So you can simply show your earnings as a freelancing income! There's no way to define your earning as crypto earning! This way, your account will not be freezed! Freelancers can earn through any path, it can be paypal, it can be moneygram or anything else! Doesn't really matter!

[teosanru]

Does anyone of you guys know a reliable CA to get my taxes filed? I've got 2 CAs in contact but they don't know shit about BTC and what they know is all negative, so they speak the same

This is a problem you will face when you are approaching a CA who does not have any knowledge about BTCitcoin and all they know about is from the media and it is hard to make them understand, all you need to tell them is to file the income you earned from BTCitcoin as income from short term capital gains depending on the amount or you can file under income from other source, these depends upon the amount of money you are getting in your bank account, the rest i will explain in TG on how i filed the taxes so that you will get an idea on how to proceed.

But? When RBI issued ban on crypto related transactions,filing the taxes using the bank account statement might let us in the risk of getting account freezed right?

RBI never issued any ban on crypyo related transaction it just ordered it's banking system to close any transactions with crypto exchanges. Even if you are filing your tax return in Cryptocurrencies you don't need to expressly mention it anywhere in your return. Especially when you are filing it under other sources.

Does anyone of you guys know a reliable CA to get my taxes filed? I've got 2 CAs in contact but they don't know shit about BTC and what they know is all negative, so they speak the same

This is a problem you will face when you are approaching a CA who does not have any knowledge about BTCitcoin and all they know about is from the media and it is hard to make them understand, all you need to tell them is to file the income you earned from BTCitcoin as income from short term capital gains depending on the amount or you can file under income from other source, these depends upon the amount of money you are getting in your bank account, the rest i will explain in TG on how i filed the taxes so that you will get an idea on how to proceed.

But? When RBI issued ban on crypto related transactions,filing the taxes using the bank account statement might let us in the risk of getting account freezed right?

No! There is no provisions made in the tax return form to show your crypto earnings! So you can simply show your earnings as a freelancing income! There's no way to define your earning as crypto earning! This way, your account will not be freezed! Freelancers can earn through any path, it can be paypal, it can be moneygram or anything else! Doesn't really matter!

Yes moreover returns are not manually processed by any human. Even the assessment officer who is in charge of checking return doesn't bothers about your business or what. Only proper human intervention occurs if your return is selected for scrutiny. Which happens to only 0.5% of total filed returns each year.

[akram143]

RBI never issued any ban on crypyo related transaction it just ordered it's banking system to close any transactions with crypto exchanges. .

Then why individual bank accounts gets freezed when they find their account related to crypto purchasing? Most importantly people who trades on localbitcoin will face this issue when they receive a transaction with a remark related to cryptos or bitcoins.

[webtricks]

RBI never issued any ban on crypyo related transaction it just ordered it's banking system to close any transactions with crypto exchanges. .

Then why individual bank accounts gets freezed when they find their account related to crypto purchasing? Most importantly people who trades on localbitcoin will face this issue when they receive a transaction with a remark related to cryptos or bitcoins.

See every bank in India on its own discretion can freeze any account or block any transaction that bank considers as suspicious. It doesn't necessarily have to be prohibited by RBI. Let me give you an example, around 5 years ago I received $2 micro-payment from some source on my PayPal account. I had linked my Central Bank of India account with my PayPal and requested withdrawal to the same. However, my bank blocked the transaction on the ground of suspicion. Then PayPal sent me the Demand Draft of ₹80 all the way from US.
After the incident above, I opened new account in HDFC Bank and linked that to PayPal. Till date, I never faced the same problem again and HDFC whole-heartily accepted all my foreign remittances to date.
So the actual problem is with the banks that the crypto traders using for trading purpose. Public sector banks are usually conservative towards risks associated with crypto transactions. I would recommend using HDFC, ICICI, Axis or Yes Bank for the above said purpose and you will never face the issue of account freezing ever.

[teosanru]

RBI never issued any ban on crypyo related transaction it just ordered it's banking system to close any transactions with crypto exchanges. .

Then why individual bank accounts gets freezed when they find their account related to crypto purchasing? Most importantly people who trades on localbitcoin will face this issue when they receive a transaction with a remark related to cryptos or bitcoins.

Thousands of people do crypto purchase and sale everyday and more like 10-20 people get this issue, even I am one of those daily buyers and sellers but not even once I have faced an issue of freezing accounts. Moreover account freeze is not that much of an issue you just need to reach your branch and answer a few questions and Tadaaa account is back. You won't even get this issue if you have an account with Good Private Bank and have a good banking history. You think anybody reads the remarks of transactions?? So don't let social media fool you because the 10 who got this problem are the one's shouting around.