• Tax on a software business + Tax on gains from Crypto

Hi, my question is two parts,

First part,
I have been running a software business as a freelancer since Jan 2018, for FY 18-19 and 19-20 I was under the taxable limit of 2.5Lacs so I reported it as other income on ITR-1, for FY20-21 I made about 19L in gross receipts, currently, I have paid advance tax assuming I can opt for presumptive taxation and ITR-4.
My questions here are,
1. If I am right at assuming the above?
2. I will probably cross 20L this current FY or next, do I need to apply for GSTIN?
3. If I apply for GSTIN, is my service zero-rated as I receive all money via Paypal (US$), also, there is an issue getting FIRC from Paypal for GST refund, will direct wire transfer from client to the current account help with this?

Second part,
I have been investing in and accumulating major crypto for the last couple of years, I have never sold and wish to sell this year for a substantial gain, need guidance on capital gains tax that applies to this.

Looking for a professional accountant long-term who can manage all of the above end-to-end and the most satisfactory answer will get a callback!
Asked 19 days ago in Capital Gains Tax

As you have mentioned you are running a software business since Jan. 2018, ITR- 1 was not applicable to you as it was not an income from other sources. Either you could have filed ITR-3 or ITR-4. 

Yes in current F.Y. 2020-21, you may file ITR under presumptive taxation scheme. We need to check whether section 44AD or 44ADA is applicable to you. If it is a software business, then 44AD is applicable. If you are providing IT services in professional independent capacity then 44ADA is applicable. Selection of correct section will depend on the facts.

 

1. Yes you are right

2. Yes you need to apply for GSTIN

3. Direct transfer will be more better than payment gateway.

 

Cryptocurrency is a virtual currency and not recognised as a capital asset under income tax act till date. Definition of capital asset is exhaustive. It may be treated as capital gain income or business income. You will get different views on this topic. It is better to treat such income as business income.

Vivek Kumar Arora
CA, Delhi
4063 Answers
338 Consultations

5.0 on 5.0

Yes you are right.

Yes you need to apply for GST once you cross 20 lakh.

For what will you take refund?

You can discuss the same over call about capital gain.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement. You can even book phone consultation for further personal assistance.

Thank you.

Naman Maloo
CA, Jaipur
3791 Answers
45 Consultations

5.0 on 5.0

Hello,

 

Firstly, income from software business would be part of the business head and ITR-1 won't be applicable in that case.

1. Yes, you are assuming it right. ITR-4 with the presumptive scheme can be filed. 

2. Yes, you would need to register for GST.

3. If you would be able to get FIRC/E-FIRC from your bank for the direct transfer, it would be better. In that case you can supply your expert services without payment of GST.

 

Regarding investment in crypto, the gains derived from the sale of cryptocurrencies can be classified as either capital gains or business income. If the crypto is purchased for the purpose of investments, it can be deemed as a capital asset. Further, depending on the period of holding of the capital asset, the gain could be termed as Long Term / Short Term Capital Gain and taxed accordingly.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2555 Answers
9 Consultations

5.0 on 5.0

1. Assuming you are providing IT development services, you will be eligible for presumptive taxation under section 44ada.

 

2. Yes

 

3. Without FIRC, your services will not qualify for zero rated.

 

Since crypto investment is for more than 3 years, long term capital gain tax will be applicable on sale of crypto assets.

 

We can help you with end to end advisory and compliance.

Lakshita Bhandari
CA, Mumbai
5460 Answers
539 Consultations

5.0 on 5.0

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