The financial Budget for the year 2022 has paid a visit to our doors along with a new crypto Tax.
On Tuesday, 01Feb, in her budget speech, financial minister Nirmala Sitharaman said, "gains on virtual digital assets will be taxed on 30% along with 1% TDS."
On people misinterpreting taxation as the legalisation of cryptocurrency in India, Nirmala Sitharaman added, "I will tax because it is a sovereign right to tax."
Let's understand what it is and how this will work.
"As per new section 115BBH of Income tax Act, 1961 , any income arising from the transfer of any virtual digital asset shall be taxed at rate of 30%."
This upholds the following cases:
CASE: 1
Suppose you invest INR 1,00, 000 in BTC (any cryptocurrency) and sell it for INR 70,000, making a loss of INR 30,000
Selling price - Buying price = Total profit/loss.
70,000 - 1,00,000 = -30000 (loss)
Now, again you invest INR 1,00,000 in ETH (any cryptocurrency) and sell it for INR 1,30,000, making a profit of 30,000.
1,30,000 - 1,00,00= 30, 000 (Profit)
According to above calculations your net profit will be -30,000 + 30000 = 0; but still, you will have to pay 30% tax on the 30000 profit you have made on ETH which is 9000.
CASE: 2
Consider that you make a purchase of INR 1,00,000 BTC (any cryptocurrency) and sell it for INR 1,30,000. Clearly, you make a gain of INR 30,000 on your investment.
Here, you will have to pay 30% tax on your gain, i.e. 30% of INR 30,000 = INR 9000.
CASE 3:
The most interesting case is that if you invest BTC (any cryptocurrency) worth INR 1,00,000 in the fiscal year 2022-2023 and you never sell it, you don't have to pay any tax till you sell.
Hope, things change around during that time;)
From July 1, 2022, any person (purchaser) responsible for paying any sum as consideration (in cash or kind) for the transfer of a virtual digital asset will have to deduct 1% tax and deposit this tax amount with the government (subject to conditions).
On every buy/sell, 1% TDS will be deducted from July 01 2022 but, a lot more clarity on this provision is yet to be received from the government's end. Once it is set into function we will update more about it.
"Gifting of virtual digital assets has also been made liable to tax in the hands of the recipient of such gift under Section 56(2)(x), by virtue of amendment to the expression “property” under Section 56(2)(vii). "
If you are gifting crypto to anyone, the receiver of the gift is liable to pay 30% tax on the value of the asset he/she has received.
FAQs
1. Is cryptocurrency legal in India?
Although government has not made any statement regarding its legalisation but, it has categorised it under asset class and imposed a tax, so holding it as an asset becomes legal.
2. When do I have to start paying 30% tax on crypto?
30% Tax will be calculated on all the cryptocurrency transactions from the start of the new fiscal year, i.e. 1 April 2022. The calculation of tax on crypto gains till 31st march 2021 will remain as per your tax slab.
3. Do NFT's also fall under taxation?
Yes, NFT's have been considered virtual digital assets, and income generated from NFT's will also be taxed at 30%.
4. Can I adjust my crypto gains under the tax slab?
No, you cannot adjust your crypto gains. For e.g. If your income is INR 2,00,000 p.a. and you have made a profit of INR 3,00,000 on crypto investment, you can not adjust it under your tax slab. You will have to pay 30% on INR 3,00,000 only.
