Cryptocurrency Trading : How Earnings are taxed
Cryptocurrency trading earnings are taxed differently in different countries.
In the United States, cryptocurrencies are classified as property,
and any gains or losses from trading them are treated as capital gains or losses.
Capital gains are taxed at different rates depending on how long you held the cryptocurrency before selling it.
Short-term capital gains are taxed at your ordinary income tax rate, which can be up to 37% in 2023.
Long-term capital gains are taxed at a lower rate, which is currently 0%, 15%, or 20%, depending on your income level.
To calculate your capital gain or loss, you need to subtract your cost basis from the fair market value of the cryptocurrency when you sell it.
Your cost basis is the amount you paid for the cryptocurrency, plus any transaction fees you incurred.
For example, if you bought 1 Bitcoin for $10,000 and then sold it for $15,000, you would have a capital gain of $5,000.
If you held the Bitcoin for more than one year, your capital gain would be taxed at the long-term capital gains rate.
If you held the Bitcoin for less than one year, your capital gain would be taxed at your ordinary income tax rate.
Cryptocurrency trading losses can be used to offset capital gains, and any remaining losses can be carried forward to future years.
In India, cryptocurrency trading earnings are taxed at a flat rate of 30%, plus a 4% cess.
There is no distinction between short-term and long-term capital gains for cryptocurrency trading in India.
To calculate your cryptocurrency trading taxes in India, you need to add up all of your cryptocurrency trading gains and losses for the year.
If you have a net gain, you will owe 30% tax on that gain, plus a 4% cess. If you have a net loss,
you can carry that loss forward to future years to offset future gains.