Crypto Taxations in India and Globally

Taxing a crypto transaction legitimizes it, however, our new crypto tax regime also tends to create more questions than answers. A crypto investor who uses his PAN card authentication to transact with crypto draws a?1% tax?reduction at the source. The income created by the transaction is also taxed at?30%.

As of present, India lacks a legislative framework to oversee crypto transactions; we can only tax on the basis of PAN card tracking. Any crypto transaction may be seen from two perspectives: income and expenditure. As such the 30% tax slab has been set in accordance with the?Income Tax Act, 1961.

On the other, another way to look at it would be that the investors and investments in cryptocurrencies are largely enhancing. Since cryptocurrency trading involves a lot of speculation the gains are also higher than the usual. This could be a factor why the 30% slab was imposed for crypto, to make it a dual income for the investor and the government.

Now lets compare how other economies are thriving on cryptos:

United States

In the US, cryptocurrency falls under the same tax regime as stocks – capital gains tax. A capital gain is any money made on an investment. Say you invested $100 in a stock and cashed out once it grew to $110, the capital gain would be $10.

There is no capital gain until an asset is sold, which is a loophole the super-rich use to pay off loans without having to pay income tax.

The US Federal tax rate on cryptocurrency capital gains ranges from 0% to 37%.

Taxpayers are required to determine the fair market value of virtual currency in US dollars as of the date of payment or receipt.

Any gains or losses made from a crypto asset held less than 12 months (short term capital gains) are taxed at the upper marginal tax bracket in which the person’s taxable income falls. Any losses can be used to offset income tax by a maximum of $3,000, and any further losses can be carried forward.

If the crypto was held in excess of 12 months (long term capital gain), the applicable tax rate is much lower – 0%, 15% or 20% – depending on individual or combined marital income.

US is also home to largest listed Crypto companies.

United Kingdom

The UK, like the US, treats cryptocurrencies the same as stocks for individual investors. If you buy and ‘dispose’ of cryptocurrency as a personal investment, you must pay capital gains tax on the profits. The tax-free allowance for capital gains tax is ￡12,300.

‘Disposal’ is a broad term that includes selling tokens for money, exchanging one type of token for another, using tokens to pay for goods or services, and giving away tokens to another person (unless it’s a gift to a spouse or civil partner).

The capital gains tax rates for disposing cryptocurrencies are 20% for higher rate (40%) and additional rate (45%) taxpayers, and 10% for basic rate (20%) taxpayers, with some caveats.

Also, capital losses from cryptocurrency can be considered for the tax liability, meaning if you sell your crypto for a loss, the loss can be deducted to reduce the overall capital gain.

In cases where the individual is running a business in crypto assets, income tax takes precedence over capital gains tax.

Germany

Germany is considered a crypto tax haven as it does not recognise crypto as monetary currency, commodities, or stocks. Rather, crypto is considered private money.

For crypto that you have owned for more than a year, the sale is tax-free regardless of the profit.You don’t even need to declare them in your tax return.

If you sell crypto assets within 12 months of buying them, profits up to 600 euros are tax-free. Profits over 600 euros from selling bitcoins are subject to tax. But even if your profit is only 1 euro more than the non-taxable value, you’ll have to pay taxes on the entire profit.

It’s a different matter for businesses, though. A startup incorporated in Germany must pay corporate income taxes on crypto gains, just as it would with any other asset.

Bermuda

There's another type of country that doesn't tax cryptocurrency gains – good old tax havens, where all assets, not just digital ones, attract little or no tax.

The island nation of Bermuda is one such territory. It doesn't impose income, capital gains, withholding, or other taxes on digital assets, or on transactions involving them.

Not only does Bermuda not tax digital assets, it even accepts tax payments in crypto. In October 2019, it became the first country to accept payments for taxes, fees, and other government services in USD Coin, a so-called stablecoin whose value is pegged to the US dollar.

Source: Economic times