Cryptocurrency investors are rushing to get tax guidance.

Cryptocurrency investors are rushing to get tax guidance.

Even as the government attempts to build a legal framework for cryptocurrencies, many people who invest or trade often in cryptocurrencies are racing to their advisors to figure out the tax consequences of their investments. Given the regulatory vacuum surrounding cryptocurrencies, investors want to know the income tax consequences on their profits, which can range anywhere from 0% to 30%, according to tax specialists.

Tax experts disagree on whether the earnings from crypto assets should be classified as capital gains (like they are for equities and real estate) or business income.

“In terms of the tax treatment of individual investors’ sales of cryptocurrencies, the principles guiding the taxation of securities as capital gains vs business income would equally apply to cryptocurrency assets,” Sudhir Kapadia, national leader-tax at EY India, stated.

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“In other words, if the frequency and volume of purchase and sale transactions is extremely high, the tax authorities may be tempted to attribute these transactions to corporate income.”

According to tax specialists, several investors have made significant profits from cryptocurrencies and have even squared off some of their investments.

Most of the money has returned to their bank accounts directly from crypto wallets or through other methods, which is likely to attract the notice of the taxman.

This comes at a time when the government is considering enacting cryptocurrency legislation.

According to ET, the government plans to identify cryptocurrencies in the new draught bill and consider them as an asset/commodity for all purposes, including taxation.

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According to those familiar with the situation, the draught bill also considers ideas to divide virtual currencies into three categories depending on their use cases: payments, investment/security, and utility (source of income).

Taxation of cryptocurrencies, according to tax experts, will be determined by how the government defines the asset.

According to tax specialists, many investors have begun to inquire about how to tax their returns from crypto assets. “The questions concern whether cryptos should be treated as assets or goods, the exchange of one type of crypto currency for another, the valuation of cryptos, the conversion of cryptos into fiat, the taxability of consideration received in cryptos by non-crypto businesses, gifts of cryptos (i.e. the transfer of cryptos from one soft wallet to another without consideration), the computation of crypto income and tax rates, indexation, and deductions allowed.”

How to get a copy of your AIS to make filing your ITR easier

How to get a copy of your AIS to make filing your ITR easier

In the Income Tax Return (ITR), a taxpayer must include all essential information for calculating total income earned. While Form 16 has information on salary income and Form 16A contains information on interest on Fixed Deposits (FDs), it is difficult to acquire information for those earnings for which no tax is deducted at source (TDS).

Taxpayers can utilise Form 26AS to acquire all of the information they need about their income and taxes. Form 26A, on the other hand, typically contains information on income where tax has been deducted as TDS.

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A taxpayer must include all necessary information in the Income Tax Return (ITR) in order to calculate total income earned. While Form 16 has information on salary income and Form 16A contains information on interest on Fixed Deposits (FDs), information on incomes for which no tax is deducted at source is difficult to come by (TDS).

Form 26AS allows taxpayers to obtain all of the information they require regarding their income and taxes. Form 26A, on the other hand, usually provides information on income that has been subjected to TDS deductions.

As a result, after the implementation of AIS, Form 26AS will lose some of its utility.

ANNUAL INFORMATION STATEMENT

Is Form 26AS going to be phased out?

It will not be stopped for the time being, and a taxpayer can access both Form 26AS and AIS at the same time. As a result, knowing and submitting information for your ITR will be a breeze.

How do you get access to your AIS?

To obtain the AIS –

  • To begin, go to incometax.gov.in and log in to your account.
  • Then go to the Services Tab and choose AIS from the dropdown menu.
  • When you select the AIS option, a new tab will appear with two options on the left side of the page: Tax Information Summary (TIS) and AIS on the right side.

You can download both TIS and AIS because they both include the same information, however TIS contains a summary while AIS contains details.

The statements are available in PDF and JPEG formats for download. Your PAN Number (in CAPITAL) followed by your Date of Birth (DDMMYYYY) 

AIS displays ALL of your digital financial transactions that the IRS is aware of.

AIS displays all of your digital financial transactions that the IRS is aware of.

On November 1, 2021, the Internal Revenue Service introduced a new statement for taxpayers called the Annual Information Statement (AIS). According to chartered accountants, the new AIS will disclose details of the taxpayer’s most digital financial transactions within a financial year (FY).
The AIS contains more information than the Form 26AS, commonly known as a tax passbook, which is provided to a taxpayer.

Here’s all you need to know about AIS, including how it differs from Form 26AS.

What exactly is AIS?

The AIS is a detailed statement that lists all of your financial transactions that were reported to the IRS by various entities (primarily financial institutions) during the fiscal year. This comprises earnings from a variety of sources, such as salary, interest, and the sale or purchase of securities, such as stock, mutual funds, and bonds. The AIS, for example, will show any sale or purchase of shares or mutual fund units, as well as any dividends or interest received.

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Part A and Part B are the two portions of AIS. Part A provides general information such as the taxpayer’s PAN, masked Aadhaar number, name, date of birth, and so on. TDS, TCS, Specified financial transactions, tax payment, tax demand and refund, and other information are all included in Part B.

The tax department noted in a press statement that taxpayers will be able to download AIS information in PDF, JSON, and CSV forms.

In addition to AIS, the IRS also introduced the Taxpayer Information Summary (TIS). This is a condensed version of the information from the AIS. According to a news release from the IRS, “TIS displays the processed value (i.e., the value obtained when information is deduplicated using pre-defined rules) as well as the derived value (i.e. the value derived after considering the taxpayer feedback and processed value). If the taxpayer provides input through AIS, the resulting data in TIS will be used to pre-fill the Return (pre-filling will be activated in stages).”

As a result, if you find an inaccuracy in your TIS or AIS, you must rectify it in the AIS, which will be corrected in real-time in the TIS as well. It is critical to review the AIS and provide input. If there is an error and you have not provided feedback seeking rectification, the income tax department may assume that the information reflected in the AIS is correct, and you may be asked to explain the discrepancy between your income tax return and the information in the AIS.

“A facility has been provided for the taxpayer to submit online comments if they believe the information is erroneous, relates to another person/year, or is duplicate. It is also possible to provide feedback by submitting information in bulk “According to the press release.

What is the difference between AIS and Form 26AS?

The TDS and TCS deposited against the taxpayer’s PAN during the financial year are listed on Form 26AS, which is similar to a tax passbook. Furthermore, information linked to specific transactions such as mutual fund unit purchases, overseas transfers, and so on will be reflected only if the transaction exceeds the stipulated limit or if tax has been deducted in the modified version of Form 26AS. For example, if tax has been deducted from a fixed deposit’s interest, it will be reported in Form 26AS.

The AIS is a more comprehensive system. In the case of AIS, transactions will be reflected regardless of whether or not tax has been deducted. As a result, even if interest on a fixed deposit has not been taxed, it will still appear in the AIS. TDS, TCS, sale, purchase of stock shares, mutual funds, dividend, interest income, and other items will be reflected on the statement. The number of transactions that can be included in the AIS is not limited. As a result, even if you put Rs 2,000 in a mutual fund SIP, your AIS would reflect it. AIS essentially represents all of your little and large specified financial transactions that have been reported to the IRS by various financial companies. These entities are required by law to report in this manner. As a result, AIS displays all of your financial transactions that the Internal Revenue Service is aware of.

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How can AIS assist taxpayers?

Naveen Wadhwa, DGM, Taxmann.com, a chartered accountant, states, “All financial transactions are displayed in AIS, including salary income, dividend income, interest income from savings and fixed deposits, sale and purchase of stocks, and so on. It would be simple for a taxpayer to report the correct information in their income tax return with the support of all of this financial information. The taxpayer can prevent a discrepancy between the data reported on the income tax return and the real financial transaction.”

“If you earned Rs 50 as a dividend from stock shares, the AIS will reflect this financial transaction. Similarly, the AIS will reflect all TDS and TCS deposited against your PAN during the financial year “Wadhwa says.

With the aid of AIS, you may double-check all of your financial transactions before reporting them to the income tax authorities. This will make it easier for you to double-check and record all of the needed information on your tax return. Dividends received in FY 2020-21, for example, are taxable in your hands. As a result, even if the sum is as low as Rs 50, you must disclose it in your ITR and pay tax on it. If you forget to report this Rs 50, the AIS will assist you remember.

In a press release, the Internal Revenue Service stated, “When filing the ITR, the value displayed in the Taxpayer Information Summary (TIS) may be taken into account. If the ITR has already been filed and some information has been left out, the return may be updated to add the missing information.”

“In the event that there is a discrepancy between the TDS/TCS information or details of tax paid as displayed in Form26AS on TRACES portal and the TDS/TCS information or details of tax paid as displayed in AIS on Compliance Portal, the taxpayer may rely on the information displayed on TRACES portal for the purpose of filing ITR and other tax compliance purposes,” the press release stated.