This is a blog post about cryptocurrencies, specifically the tax implications of cashing out on crypto investments. For a lot of people that make money by trading cryptocurrency, this is important to know and research before they actually cash out. This was written as a guide for people that are not familiar with taxes and are just getting started with crypto investing. I hope you find it useful!
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What you need to know about cashing out on cryptos:
In order to understand what happens when you cash in cryptos, we have to first understand the basics of how they work.
Crypto is not like stocks. Stocks are owned by companies, they represent shares of company equity. Bitcoin and Ethereum are tokens, not shares in the companies that create them. If you sell the tokens, the money you get is yours. It’s not currency that can be spent and invested, it’s a “store of value” for which you pay tax on crypto gains (but no tax on regular income). So you have to understand how much tax a crypto investment will cost.
What happens when people cash out?
Basically, when someone cashes out their cryptos, they’re making money and paying taxes on that money. On the surface, this sounds bad. But if you’re paying tax on gains, you’re only paying taxes on money that would otherwise be worthless.
Remember: when you make money and pay taxes on that money, you’re paying taxes on money that would otherwise be worthless. It’s like trading stocks: when you sell a stock and make a profit, the government is asking for a cut of the profits. It doesn’t matter if you paid $10 or $10M — they only want 25% of the profit.
What happens when you cash out crypto?
When you sell crypto, there are two main taxes that you need to be aware of:
GST (Goods and Services Tax). This is a sales tax that applies to goods and services, as well as real estate transactions. The good news is that GST does not apply to cryptocurrencies however, it may apply to the money gained from selling them if the cryptocurrencies are considered to be investment property which means they’re considered to have a fair market value greater than their cost base.
(Goods and Services Tax). This is a sales tax that applies to goods and services, as well as real estate transactions.
If you’re trading in cryptocurrencies, the Indian Revenue Agency recommends that you keep detailed records of your purchases and sales (including the date, the amount, the price at which you bought it, and the price at which you sold it). In order to properly calculate your capital gains or losses when cashing out on cryptos, I recommend using the best crypto tax software which will do this for you.
Binocs is one of the best services which you can use to calculate crypto taxes automatically. It is easy to use and provides you with the facilities that you actually need.