Cryptocurrency is the best investment in the modern world. Traders who earn profits while selling digital currencies should pay taxes. The Reserve Bank of India has not legalized Cryptocurrency yet. Bonds, stocks, and other assets are treated similarly by the IRS. 

Likewise, you can make money from Cryptocurrencies by either receiving or holding them for a longer or shorter period. If you decide to invest in Crypto, you should understand how to use it to reduce taxes. Every investor should pay crypto tax according to the transaction nature. 

How does digital currency tax work?

It is essential to know how Cryptocurrency taxes work before investing in a digital asset. A government-supervised crypto investment activity must be familiar to everyone. The authority offers guidance to aid the investors in determining how much the government treats digital currency taxes. Crypto is not treated as currency for federal tax. As an alternative, the digital currency transaction treats property such as bonds, stocks, etc. 

CFTC categorizes Crypto as a commodity if regulating different Cryptocurrency investments. Are you wondering how to pay crypto tax

Well, you can hire a qualified tax professional expert in Crypto taxes to aid with declarations. The tax accountant works with the client and suggests the right solution. They use the latest tools to calculate the Cryptocurrency tax effectively. 

When you should pay crypto taxes 

The traders should pay the tax on Crypto while buying or selling their digital currency. When a person gets Cryptocurrency as a gift, the digital currency can be taxed as profit. Remember, all crypto transactions are not taxable. Some non-taxable events are purchasing Cryptocurrency with money, donating Crypto to charity, and holding it. The followings are some situations to pay tax on Cryptocurrency:

  • Use Crypto to buy services or goods 

When you use Crypto to buy goods or pay for mobile service or haircut, you will require tax on the purchase. The digital currency can be used to purchase any item you desire. It would be best if you sold the BTC and other coins for fiat currency before using them to exchange goods or services.

  • Mining Cryptocurrency 

When you get profits from mining Cryptocurrency, it is taxed as revenue. In addition, some miners who earn income from mining crypto need to pay tax as a business profit.

  • Sell Crypto for money

Suppose you sell bitcoin or others for RBI, not legalized currency, and earn income. You must pay profit taxes on the bonus.  

  • Exchange Cryptocurrencies

It is comparable to selling one Crypto to buy another coin if converting digital currency for another. The trader must pay the capital taxes on selling the Cryptocurrency for the first time if they receive more profit. 


On the other hand, when a person decides to pay in the digital asset, they should pay tax on Cryptocurrency income based on tax category. When you hire a tax accountant, you can stay calm and concentrate on other tasks.