In April 2022, the Indian Government laid down a stance on crypto taxation. This was the first time when cryptocurrency was discussed under the law. The Central Board of Direct Taxes proposed a new tax regime in favor of income or gains arising from transfer of “Virtual Digital Assets'' inter-alia NFT’s or any information, code, number or token generated through cryptographic means.
How, When and On What a 30% crypto tax is payable in India? These are the most asked questions by Indian cryptocurrency Investors. And this blog lets you understand the Crypto taxation framework in detail.
Key Points to Note from the Proposed Framework
1. Any income generated from the transfer of Virtual Digital assets is 30% Taxable and is effective from 1 April 2022.
2. No deduction is permitted in regards with any expenditure, except the cost of acquisition of the VDAs.
3. The loss incurred cannot be set off against any income and even cannot be carried forward.
4. Person who receives a VDA in the form of Gift is liable to pay 30% tax regardless of the amount.
In July 2022, the Government imposed 1% TDS to be paid at the time of payment to any resident as consideration of Transfer of VDAs.
To apprehend the calculation of 1% TDS on crypto transactions visit.
How 30% Crypto Tax will be Calculated in India?
Let’s understand the calculation of 30% crypto tax in India through various 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)
As per the 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 because as per the aforementioned law you can not set off losses against profit.
CASE 2:
Let’s 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. That is you can avoid tax on cryptocurrencies by simply holding them.
FAQs on Crypto Taxation in India
1. Is cryptocurrency legal in India?
Although the government has not made any statement regarding its legalization, it has categorized 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. When will I have to pay tax on Cryptocurrencies in India?
Any income arising from the sale of virtual digital assets is subject to a 30% tax in India.
4. Will I have to pay tax on buying crypto in India?
Acquiring cryptocurrencies does not involve a 30% tax. You can buy and HOLD crypto to avoid crypto tax in India.
5. Do NFTs also fall under taxation?
Yes, NFTs have been considered virtual digital assets, and income generated from NFTs will also be taxed at 30%.
6. Can I adjust my crypto gains under the tax slab?
No, you cannot adjust your crypto gains. 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.
7. Do I have to pay tax while transferring crypto to other exchanges or wallets?
There is no tax on transferring funds from one wallet or address to another until you sell it.
8. Is there any Tax on crypto mining?
No, crypto mining is not taxable in India under VDA law. But, the income generated from token value must be filed under business income.
9. Is there any Tax on crypto Staking?
Yes, a 30% Tax is applicable on the value of crypto earned as interest on staking cryptocurrencies.
10. What will happen to my deducted crypto TDS if my tax amount is less?
You can claim your remaining TDS back at the time of income TAX filing if the amount of tax paid is less than the amount of TDS deposited.
11. What will happen to my TDS if my tax amount exceeds TDS?
Your TDS will be set off against the taxation amount, and you will have to pay the remaining tax amount only.
For instance, if your filed TDS amount is 5000 and the crypto tax amount you have to pay is 8000, your taxation will be set off against the paid TDS, and you will only have to pay 3000 extra as tax.
12. Do I have to pay tax if I have not withdrawn my profit to my bank account from the exchange or wallet?
Yes, Once you sell your crypto, you become liable to pay tax irrespective of the location of your funds.
