There is an enormous amount of confusion about the current cryptocurrency laws and the introduction of possibly unfavorable laws in the foreseeable future. The idea of dealing with cryptocurrencies has been confusing and equally intriguing to the Indian market since the very beginning.
The unfortunate reality is that people are highly likely to buy into the hype and mainstream perception of laws instead of taking the time out to understand them properly. In their defense, clear rules and protocols for tax on stocks and property have been in place for the market to follow, but those for cryptocurrencies still seem to be as amorphous as can be.
It should be known that the RBI had only restricted banking access to cryptocurrency entities, but the Indian population assumed that the RBI had declared cryptocurrencies illegal.
The fact remains that you ought to pay taxes on cryptocurrencies if you’re profiting from them, just as you would with other forms of income. You will need to use a cryptocurrency tax calculator for the same.Â
What is a cryptocurrency?
This question is probably the first thing on your mind.Â
Simply put, a cryptocurrency is a medium of exchange based on the internet that uses cryptographic functions to run financial transactions.
It runs on blockchain technology, and its most prominent characteristic is the absence of a central entity. With regular forms of income, a central server is put in place to ensure that there is no double-spending between the two parties in a payment network.
However, in a decentralized system like this, there is no such server. Hence, ever entity in this peer to peer network is required to have a complete list of the transactions. This is to make sure the future transactions are valid. Transactions occur when the private key of the sender signs them.
Once the private key signs the transaction, it is sent to the entire network and transferred from one peer to the next. If you want to transfer money in the form of bitcoins to your friend, your private key would have to sign the transaction to make it happen. Read here to know more about Best Crypto Tax Software.
Scope and Value of Cryptocurrencies-
Considering the confusion and the level of sophistication that comes with crypto concepts, it is fair to question the scope of cryptocurrencies to determine if investing in them is worth it.
Cryptocurrencies are irreversible, pseudonymous, and secure by nature. What makes crypto a game-breaker is the fact that it is independent of Government influence. Cryptocurrencies pose a significant threat to the current Government-regulated market.
If you’re dealing with cryptocurrencies, you can not prevent someone from using them. You also cannot reverse a previously signed transaction.The rise of bitcoin paved the way for a new economy. Bitcoin is at the helm of a modern economy.
Cryptocurrencies are independent of political influence and not only promise to stay that way, but also increase their value over time. It is not surprising that people around the globe are buying into cryptocurrencies at an increasing rate. This is to protect themselves from the devaluation of their respective national currencies.
Cryptocurrencies have their advantages and disadvantages and in turn, are as risky as they are rewarding. Of course, this depends on how you choose to look at it. Regardless of the perception of the public, cryptocurrencies are here to stay and change the economy beyond recognition.
You can decide to be a part of this economic revolution or watch things unfold over the next few decades. However, if you’ve decided to invest in cryptocurrencies, you ought to know about cryptocurrency tax calculators.
How risky is it?
Before we talk about cryptocurrency tax calculators, it is vital to consider the risks that come with this new digital gold. Cryptocurrencies have a few cutting edge characteristics that make them as lethal as they’ve proven to be.
A transaction cannot be reversed once it is confirmed regardless of what you do. You cannot contact your bank or any other authority to undo your actions. There is no safety net. Cryptocurrencies or accounts cannot track back to their real-world identities. You receive bitcoins on addresses that are chains of multiple characters. It is possible to analyze the transaction flow. However, it is impossible to determine the real-world identities of the accounts in question.
The transactions may be irreversible, but they are definitely secure. The owner of the private key is the only person who can transfer cryptocurrencies. It is impossible to hack the system due to the complexity of the cryptographic functions.
Since centralization is absent, permission to use cryptocurrencies is not required. You can download the software in the blink of an eye and transfer cryptocurrencies without issues.
Best Cryptocurrency tax calculators at your disposal
Zenledger
Zenledger is known to provide excellent tax calculation services for crypto investors. It enables its investors to import their cryptocurrency transfers and calculate their capital gains.
Bitcoin Taxes
An immensely popular cryptocurrency tax calculator, this platform enables its users to import their cryptocurrency sales, purchase, and trade information throughout the year from a variety of well-known cryptocurrency exchanges.
Libra Tax
This tool analyzes the crypto-related activities of the clients and estimates their capital gains and losses. The software is connected to major cryptocurrency exchanges like Coinbase and Bitstamp to track transactions of its clients.
Crypto taxpayers can avail of the Libra Tax calculator free of charge up to 500 transactions. It also offers a premium service and a paid subscription. The premium service enables the user to download tax reports, and the paid subscription allows the investor to track 5000 operations.
Conclusion
As confusing as cryptocurrencies seem to be, you have a lot to gain given how they are bound to change the economy as it is known today. Taxation on cryptocurrencies can never be made as easy as it can be made today. All you need to do is find a good cryptocurrency tax calculator.
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