Getting Ready with Some Basic Questions

Cryptocurrency taxability

Be aware of cryptocurrency taxability rules and regulations of each country in 2022

Not withstanding their controversial nature, cryptocurrencies are here to stay. 2021 has proved all the way that cryptocurrencies such as Ethereum, Litecoin, Dash, and Bitcoin have strong reliance and growth instinct, and there are other forms as well. With such development comes the inevitable and complicated issue of taxation. The issue is complex because it engulfs a lot of newly emerging and not-so-clearly defined factors. This situation calls for asking certain vital questions to tax professionals to sharpen the understanding of the investors about the issue of cryptocurrency taxability.

The scenarios in countries around the world are not exactly the same insofar as the issue under consideration here is concerned. In the USA, for instance, buying and holding cryptocurrency without being frequently proactive in transactions may not invite the attention of the Internal Revenue System (IRS) bosses but very proactive dealings may invite complications. In India where cryptocurrencies are witnessing fairly constant growth, the scenario is less clear. The Government of India has not formally introduced any law or regulation of crypto taxation but there are steadfast laws in India, which impose a tax on citizens’ income generated in any form. But there have been some rules and regulations regarding investments in cryptocurrencies for crypto investors. 

Under such circumstances, a set of queries are to be made to dispel doubts and confusion and gain appropriate knowledge about the issue. In order to find a reliable tax professional who has sufficient knowledge of cryptocurrency taxability, it is important to ask multiple questions such as:

  • Do you have any clients dealing with cryptocurrencies and if yes, how do you negotiate their case? 
  • Can you form my past transactions tell me whether I have indulged in taxable or non-taxable actions? 
  • If I am liable to pay taxes for crypto transactions what will the amount that I have to shell out and how do my capital gains or losses count in this regard? 
  • What kind of income tax am I liable to pay if I indulge in mining new coins, receive coins and/or tokens as income or reward? 
  • How to procure accurate records of transactions made by me vis-à-vis cryptocurrencies? 
  • What to do in the case of non-reporting of crypto income in the past?

While certain specific situations may vary from country to country this set of broad but relevant questions help both in testing the waters and in getting prepared for any eventuality concerning the crypto tax scenario which is anything but simple.

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