Tax on cryptocurrency in India
Tax on Cryptocurrency – Budget 2022 Levies 30% Tax & TDS on Crypto Assets. In short, you can easily understand the applicability of tax on cryptocurrency through the given point-
(1) Virtual digital assets mean inter-alia code or number or token (not being Indian or foreign currency) generated through cryptographic means or otherwise and includes Non-Fungible Tokens or any other token of similar nature
(2) Income from virtual digital assets taxable at 30%
a. Cost of acquisition allowed as a deduction – no other deduction allowed
b. Loss on the transfer of virtual digital asset not allowed for set-off or carry forward purposes
c. This provision shall take effect from AY 2023-24
(3) Gifts of virtual digital assets will be a benefit taxable in the hands of the recipient
(4) TDS at 1% introduced for virtual digital assets transactions
a. On transfer consideration payable/ paid to residents. Applicable even where consideration is wholly / partly in kind or in exchange for another virtual digital asset.
b. Will override TDS obligations under section 194O, which applies to payment made by the e-commerce operator to an e-commerce participant
c. This provision shall take effect from 1 July 2022This amendment will be effective from AY 2022-23
Contents of this post
Virtual digital assets mean inter-alia code or number or token (not being Indian or foreign currency) generated through cryptographic means or otherwise and includes Non-Fungible Tokens or any other token of similar nature.
Cryptocurrencies are digital assets and decentralized systems that allow for secure online payments. Such as
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
From the date 01.04.2022, Income from virtual digital assets taxable at 30%
a. Cost of acquisition allowed as a deduction – no other deduction allowed
b. Loss on the transfer of virtual digital asset not allowed for set-off or carry forward purposes
c. This provision shall take effect from AY 2023-24
As per budget 2022, Tax is applicable on income from the virtual digital assets at 30% from 01.04.2022.
Income from virtual digital assets taxable at 30% and
a. Cost of acquisition allowed as a deduction – no other deduction allowed
b. Loss on the transfer of virtual digital asset not allowed for set-off or carry forward purposes
Gifts of virtual digital assets will be a benefit taxable in the hands of the recipient
TDS at 1% introduced for virtual digital assets transactions
An announcement on tax on crypto income is a great move forward by India for 3 reasons –
Yes, India has not banned crypto investing. It has been brought under the tax net. Do your due diligence and stick to your risk profile before investing in cryptocurrency. Invest in cryptocurrency at a maximum of five percent or with money you can afford to lose because it has the highest risk-reward ratio. Invest cautiously until you understand this new animal. Also, now be prepared to pay a tax of 30 percent on your crypto gains.
There are simple steps that can be followed to calculate tax on income from crypto assets in India such as
You can not save tax if you will trade in cryptocurrency in India after 01.04.2022. As per budget 2022, you will have to pay tax @ 30% on profit on the sale of any virtual digital assets/ cryptocurrency. Because there is no further deduction that will be allowed except the cost of acquisition.
There are different tax rates in different Countries, somewhere high cryptocurrency tax or somewhere low cryptocurrency tax such as
No, if you are trading in cryptocurrency/ virtual digital assets in the countries where are tax is applicable on cryptocurrency transactions.
A single tax rate is applicable on income from the sale of virtual digital assets such as bitcoin and altcoins in India that is 30% with deduction of the cost of acquisition only no other deductions are allowed.
Although the 30% tax rate on cryptocurrencies is high, experts believe that it may not remain like this forever. Tax rates have been continually revised in India and it would apply to cryptocurrencies as well.
The government may be taking a hard step initially to ascertain how things work out. This is something entirely new, so it makes sense to be cautious during the initial stages. As more data is generated and crypto’s impact on the economy is better understood, the tax rate may be revised.
A currency can be defined if it is issued by the central bank. “I said the Reserve Bank will be issuing a digital currency, a currency is a currency only when it is issued by the central bank even if it is a crypto. But anything which is outside of that loosely all of us refers it to be cryptocurrency but they are not currencies,” Sitharaman said when asked about cryptocurrencies.
She clarified that what the RBI issues in the next fiscal will be the digital currency and everything else apart from that are digital assets being created by individuals and the government will be taxing the profit which is made during transactions of such assets at 30 percent.
In the memorandum explaining the provisions in the Finance Bill, the government said that “Virtual digital assets have gained tremendous popularity in recent times and the volumes of trading in such digital assets have increased substantially. Further, a market is emerging where payment for the transfer of a virtual digital asset can be made through another such asset. Accordingly, a new scheme to provide for taxation of such virtual digital assets has been proposed in the Bill.”
30% tax rate will be applicable on income from the sale of cryptocurrency in India.
1% TDS will be applicable for consideration of the crypto transactions.
No, still not clarified that cryptocurrency is legal in India.
No. You will only have to pay tax only on your income or profit from cryptocurrencies. For example, if you have purchased cryptocurrencies worth Rs 50,000 and then sell for Rs 55,500, only Rs 5500 will be taxed at 30 percent and not the entire investment.
Again, No. The finance minister has also clarified that only the digital currency issued by the Reserve Bank of India will be recognized as the currency. Bitcoin and other cryptocurrencies have only been classified as digital assets.
An Accountant, GSTP, GST blogger, Website Creator, SEO Builder & Co-founder of the website https://gstportalindia.in for the help of GST Taxpayers of India. Having a perfect accounting experience of more than 10 years in a Private Ltd Company.
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