Bitcoin and Cryptocurrencies, in general, have always had a mixed bag of reactions. In parts of the world that have well-defined bitcoin tax reporting regulations, people have been buying into cryptocurrency in a big way. They are becoming increasingly aware of the impact of cryptocurrencies on the modern economy.
On the other end of the spectrum, people in countries with loosely defined Bitcoin tax reporting laws are skeptical about the cryptocurrencies. Such is the case in India.
Launched in 2009, Bitcoin announced itself as the pioneer of a new digital currency. While the concept of digital money is not new, the previous attempts at the same failed quickly. However, Bitcoin has successfully managed to navigate the chaos and confusion in today's market.
Bitcoin was launched in 2009 by an unidentified person or group of persons called Satoshi Nakamoto. It runs on Blockchain technology.
A blockchain is a type of distributed ledger. This type of ledger does not have a centralized controlling system. Network members known as nodes verify all the ledger entries. The problem with centrally controlled systems is that they are vulnerable to manipulation and failure because the entire system runs from a single point of control.
Characteristics of Bitcoin
Bitcoin has several unique features that can be perceived as good and bad, depending on your goals and priorities.
Transactions are irreversible
All transactions via Bitcoin are final. Bitcoin's functioning is based on a peer-to-peer network and there are no intermediaries. Unlike in the case of centralized systems, all transactions are final. It is vital to make sure that you're sending your money to the right account.
All you need is a Bitcoin Wallet and a Bitcoin address to get started. You are allowed to have an unlimited number of Bitcoin addresses where you will be able to conduct bitcoin transactions.
Bitcoins make for a cost-effective method of transactions as they exist within a peer-to-peer (P2P) network. This network sends and receives information between two computers without the use of any intermediary bodies. Traditional banking systems make use of intermediaries and have charges associated with transaction processing.
Shorter Transaction Times
The absence of intermediaries in a P2P network allows the transactions to take place in a minimal amount of time.
Bitcoin Tax Reporting in India
Bitcoin transactions are currently illegal in India. Hence, there are no concrete rules or regulations around Bitcoin taxation.
Given the lack of solidity in cryptocurrency rules in India, one can only speculate at this point. There are four scenarios where Bitcoins could be taxed.
If Income is generated from Bitcoin mining
If Bitcoin is exchanged for fiat currencies
If Bitcoin is used as a form of payment for goods and services
If Bitcoins are held as stock-in-trade
Bitcoin Tax Reporting and Tax Calculators
It is no secret that Bitcoin Tax calculators are invaluable to a crypto trader. As daunting as Bitcoin Tax Reporting is, it can be simplified with the help of a crypto tax calculator. Here are a few good tax calculators:
ZenLedger is easily one of the best Bitcoin Tax Calculators known to the market. Its design and user
-friendly interface make Bitcoin Tax transactions easy as can be.
The platform enables you to create a tax report within minutes using your Bitcoin details. ZenLedger has tied up with TurboTax to help you import your Bitcoin Tax reports to your tax filings and auto-fill tax forms.
ClearTax has a crypto-tax calculator that can be used to calculate Bitcoin Taxes. The platform needs you to provide basic details that include how you acquired your Bitcoins, the price of the Bitcoin at which it was bought, the selling price of the Bitcoin, and the period for which the Bitcoin was held before the transaction.
CoinTracker is a user-friendly platform that helps you create a tax report for your Bitcoin transactions. In addition to this, it auto-fills your tax forms.
You can open an account on CoinTracker using your email address. Once you create an account and sign in, you will be redirected to a page where you can start your Bitcoin tax reporting and calculations. You will need to follow these steps to create a tax report for your Bitcoin transactions.
Step 1: Import all your transaction data from exchanges and wallets
Step 2: Review your purchases and sales transactions.
Step 3: Download the Bitcoin tax report and review the auto-filled tax forms
myCryptoTaxCalculator is yet another easy to use crypto-tax calculation software. It is used to calculate taxes on your Bitcoin transactions.
This platform can be used to help you fill out the needed information in the tax forms. myCryptoTaxCalculator generates a tax report for you in the following three steps:
Step 1: Import all the data from your exchanges and Bitcoin Wallets
Step 2: Review your purchase and sale transaction history
Step 3: Generate a tax report for all your transactions.
CryptoTrader.tax is a powerful Bitcoin tax reporting software that is built to make tax reporting much easier than it usually is.
Instead of spending countless hours filling up spreadsheets, hoping you do not make a mistake, use this software. It allows you to import your exchanges and wallets directly onto the platform effortlessly. The CryptoTrader.tax engine processes this data and runs it. All it takes is a click of a button, to receive a tax report that you can file yourself.