Satoshi Nakamoto 
The rapidly growing market of crypto coins like BTC, XRP, LTC, ETH, DOGE has become a center of attraction for many investors in India. However, due to its complexity and constantly changing rules, many people make mistakes while filing ITR. These mistakes can not only lead to financial losses but also lead to legal action.
The Indian tax department has started keeping a close watch on transactions related to cryptocurrencies. In such a situation, if you also invest in crypto, then it is important that you take precautions while filing taxes. Here we have covered about some common mistakes that should avoid filing crypto taxes in India.
#1. Show Crypto Related Profit
The first and foremost mistake that people make is not showing the profit from cryptocurrencies in the income tax return. Income from cryptocurrencies is taxed in India. Whether you are trading in crypto or getting income from mining, you have to include it in your income. Under Section 139 of the Income Tax Act, any type of income, from whatever source, is required to be shown in the return.
#2. Maintain Proper Record
The second common mistake is not keeping proper records of crypto transactions. Many people do not keep track of their transactions, which leads to problems later on when the income tax department inquires. The details of each transaction, such as the amount of crypto purchased, the purchase price, the sale price and the date of the transaction, etc. should be recorded properly. This is not only useful when filing income tax returns but is also important for any investigations in the future.
#3. Show Crypto Gains as Capital Gains
The third mistake is not showing crypto gains as capital gains. In India, income from cryptocurrencies is classified as capital gains. If you sell your cryptocurrency on a crypto trading platform in less than a year, it is considered short-term capital gain and is taxed as per your slab rate. If you hold it for more than a year, it is considered long-term capital gain and is taxed at 20%. It is important to classify it correctly so that you pay the correct tax rate.
#4. Ignoring Crypto Gifts
Another common mistake is ignoring crypto gifts to save tax. Many people gift cryptocurrency to their family members or friends and think that it will not be taxed. However, according to the Indian Income Tax Law, if the value of the crypto gift is more than Rs 50,000, it will be included in the income of the recipient and will be taxed. Therefore, this should be kept in mind while giving or receiving crypto gifts.
#5. Crypto Mining also Taxable
Not including income from crypto mining in the income tax return is also a big mistake. The cryptocurrency that is obtained from mining should be included in your income. Apart from this, the expenses incurred in mining, such as electricity bill, equipment cost, etc., can be shown as business expenses. This can reduce your total taxable income and you get some relief!
#6. Foreign Crypto Exchanges
Some people use foreign crypto exchanges and think that it will not be taxed. This assumption is wrong. If you are trading on any foreign exchange or receiving income from there, then it should also be included in your total income. Since India taxes worldwide income of resident individuals, it is important to take foreign income into account as well.
#7. Understand Tax Laws and Guidelines
The last but not the least mistake is not understanding the tax rules and guidelines applicable to cryptocurrencies. The tax policy related to cryptocurrencies in India keeps changing from time to time. Therefore, it is necessary to understand the latest rules and guidelines and do your tax planning accordingly.
As per the current crypto tax policy, there is a 30% crypto tax in India. Apart from this, you should also be aware of other related taxes like 1% TDS and 4% cess etc.
To avoid all these mistakes, the best way is to consult a good tax advisor or CA. They can help you file the correct tax returns and avoid inquiries from the Income Tax Department. Reporting the gains from investing in cryptocurrencies correctly is not only your legal responsibility but it can also save you from any kind of problem in the future.
So, if you are investing in crypto, try your best to avoid these common mistakes and fulfill your tax liabilities on time and correctly. This will not only save you from legal problems but will also show you to be a responsible citizen.
