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7 Tips to Save Crypto Taxes in India 2023 [ITR Guide]

Save Crypto Taxes in India - The hottest trend in the worldwide investment market right now is cryptocurrency investing, but before you invest, follow these tips to reduce crypto tax. Continue reading to learn.

Overview of Crypto

One of the most popular subjects in the financial news right now is cryptocurrency. Statistics demonstrate that early adopters of the technology made huge profits from investing in cryptocurrencies, although the market has since been erratic. We’ve witnessed investors gain fortunes from buying and trading virtual currencies over the past several years, and we’ve also watched some of those fortunes implode. Perhaps you’ve already purchased some cryptocurrency for yourself. If this is the case and you haven’t already sold, you may be planning to hold forever or simply looking for a better exit strategy. If it’s the latter, you should consider your strategy for handling cryptocurrency taxes before pressing the “sell” button. Yes, if you sell for a profit, naturally, you want to pay as little in cryptocurrency taxes as possible to maximize your gains and keep a larger portion of your earnings. To do this, you must first have a fundamental understanding of the taxation of cryptocurrency gains. Then you can consider how to save Crypto taxes. The information and tips below should enable you to reduce your cryptocurrency taxes and improve your financial situation. Contact Vakilsearch if you want further details. They can assist you in any scenario, whether it be a financial or legal one.

What are Crypto Taxes?

For income tax reasons, cryptocurrency is regarded as “property.” And the IRS treats it as a capital asset for the average investor. Therefore, cryptocurrency taxes are the same as any other gain derived from the sale or exchange of a capital asset. When you purchase a capital item, such as a stock, bond, property, widget, Dogecoin, Bitcoin, or other sorts of investment, you establish a basis equal to your acquisition cost. You can tell if you have a capital gain or loss when you sell anything by comparing the sales price to your cost basis. You have a capital gain if your proceeds are higher than your base. If it is reversible, you have a capital loss. You must also take into account how long you owned the asset. Your gains or losses in cryptocurrencies will be classified as “short-term” or “long-term” depending on how long you hold them. The amount of crypto taxes you must pay will also be significantly influenced by this distinction.

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7 Tips to Save Crypto Taxes in India

Here are some tips to lower your tax bill.

Wait Till Your Immediate Gains Into Long-Term Gains

Different capital gains rates will be applicable based on how long you own bitcoin, as was just discussed. If you want to lower your tax bill, hold onto your cryptocurrencies long enough to turn your short-term gains into long-term gains. You’ll probably pay a lower tax rate on any capital gains if you can hold onto your bitcoin for at least a year before selling it, even if it may not be easy.

Equalize Capital Gains and Losses

By offsetting capital gains with capital losses, crypto investors can reduce their tax burden. The way this works is to use any remaining long-term capital gains against any losses on crypto assets you sold throughout the year to reduce your taxable gains on cryptocurrencies (save Crypto taxes) or other investments that have appreciated.

Sell in a Low-Income Year

Another timing factor you might take into account is choosing to sell in a low-income year while you wait for your cryptocurrency gains to transition from short- to long-term. Taxes on long- and short-term profits can be reduced by selling during a low-income year.  If you have short-term profits, which are subject to ordinary income tax, you won’t have as much additional income piled on to put you in a higher tax rate.

Reduce Your Taxable Income

Lowering your taxable income is another tried-and-true method of tax minimization, which is closely tied to selling your appreciated investments in a low-income year. To reduce your taxable income, you must search the tax code for tax credits and deductions.

Invest Cryptocurrency in a Self-Directed Individual Retirement Account

Investing in a tax-free or tax-deferred Self-Directed Individual Retirement Account is an additional method to reduce your cryptocurrency tax liability (SDIRA). Therefore, you either pay taxes now when you may have a lower taxable income in retirement or you pay taxes in advance when you contribute to a Roth SDIRA because you expect to pay more in taxes in retirement.

Gift a Family Member the Assets.

Another option for reducing your bitcoin tax payment depends on your plans for spending your wealth. You can think about giving your cryptocurrency to family members. You can give without paying taxes up to ₹13,25,864 per individual each year. Even though the recipient receives the cryptocurrency’s basis, they may have a low enough income to avoid paying taxes on the appreciated asset when it is sold. Or, at the absolute least, pay less in taxes than you might if you tried to sell the cryptocurrency on your own.

Donate Valuable Cryptocurrency to a Good Cause

Like giving appreciated cryptocurrency to a family member, you may also consider giving your cryptocurrency to a good cause. This will not only result in no capital gains tax but it may also result in a sizable tax deduction that you can list on your tax return. You can deduct the asset’s appreciated fair market value from your taxable income at the time of donation. You could be able to claim this as a charitable deduction on your tax return, for instance, if you hold $50,000 which is ₹41,43,325 worth of Bitcoin, and decide to donate it to a cause you frequently support. Additionally, the nonprofit organisation won’t have to pay capital gains taxes when it later sells the donated bitcoin if it meets the requirements to be a 501(c)(3) tax-exempt organisation.

Giving It to Your Estate

Giving up your cryptocurrency holdings as a part of your estate is the last method on this list for minimising your tax obligations. The investment will have a “step up” (or increase) in basis to its fair market value at the time of your death when you pass away.  By doing this, when your heirs sell the bitcoin they inherited, they won’t be required to pay taxes based on your initial basis. But depending on the virtual currency you possessed, they could suddenly go up (or down) due to the high volatility of cryptocurrencies. Your heirs’ tax burden won’t be as high if this occurs and virtual currencies take off because they received the tokens on a stepped-up basis.


These are a few strategies that help to save Crypto taxes. However, it is strongly suggested that you get the advice of Vakilsearch professionals before putting any of these recommendations or strategies into practice.  Keep in mind that if you received any cryptocurrency earnings on or before 31 March , 2022, the tax rate for cryptocurrencies that was announced in this year’s budget will not apply to you. A good strategy that complies with income tax legislation will ensure the best results from your tax-saving plan.

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