Can PMLA compliance be the key to wider adoption of cryptocurrency? Our expert analysis delves into the impact of PMLA regulations on the cryptocurrency market.

Can PMLA compliance be the key to wider adoption of cryptocurrency?

The Ministry of Finance has just issued a notification that will help the crypto industry march towards the mainstream. Effective immediately, cryptocurrency and virtual digital assets (VDA) will fall under the purview of the Prevention of Money Laundering Act (PMLA) 2002. This means that any wrongdoing or fraud related to crypto and VDA will be scrutinized by the Enforcement Directorate (ED).

This move is a significant step forward in regulating the crypto industry and combatting the negative stigma associated with it. With the introduction of new regulations, crypto investors can have peace of mind knowing that their investments are protected from fraudulent activities. But what exactly does this mean for the crypto industry? Let’s find out! 

What is PMLA and what significant impact will the new regulations have on the crypto industry?

The Prevention of Money Laundering Act (PMLA) of 2002 is a robust law enacted by the Indian government to combat money laundering, terrorism financing, and other financial crimes. This legislation was formulated to put a stop to the exploitation of the financial system by criminals to launder their illicit gains. 

The PMLA mandates strict penalties and punishments for individuals and organizations found guilty of money laundering. Have you ever wondered how money launderers move their illicit money? The PMLA provides a comprehensive framework to prevent such illegal activities and promotes a transparent financial system, thereby safeguarding the integrity of our nation.

Now, the question is what impact will the new regulations bring on the crypto industry?

For starters, it will increase transparency and accountability in the sector, which has been a concern for many. The regulations will also provide a level of assurance for potential investors who have been hesitant to invest in crypto due to the lack of regulations.

While some may argue that this move will stifle innovation and growth in the crypto industry, it's important to remember that regulations are necessary for any industry to thrive. The introduction of PMLA regulations for crypto and VDA is a step towards legitimizing the industry and bringing it into the mainstream.

What is the prime objective behind this introduction of new rules?

The Indian government's recent move to mandate KYC, anti-money laundering regulations and due diligence for entities dealing in cryptocurrency is a step in the right direction. The Finance Ministry's notification means that cryptocurrency exchanges will now have to follow the same regulations that apply to banking and other financial entities under the PMLA. This move not only brings India to par with the rest of the world but also instils a sense of security among the public engaged in the crypto exchange.

But why is this move necessary? Well, the strict tax regulations imposed on Indian cryptocurrency investors have severely restricted commerce between Indian cryptocurrency exchanges. This has led to the majority of Indian cryptocurrency investors switching to foreign cryptocurrency exchanges, which is not a desirable outcome for the Indian economy.

Moreover, the RBI deputy governor's comparison of cryptocurrencies to Ponzi schemes highlights the need for regulations to protect investors. It is essential to prevent any fraudulent activities in the crypto ecosystem, and the PMLA regulations provide the necessary framework for the same.

Final Thoughts: Is this going to be a positive step towards the Future of Crypto?

The Indian government's decision to bring crypto businesses under the ambit of the PMLA is a commendable move towards establishing a well-regulated environment for the industry. This step promotes transparency and accountability, while also aiding in identifying and curbing the activities of bad actors within the industry. Furthermore, it strengthens the collective efforts of the industry to prevent the misuse of crypto through money laundering and other illegal activities.

Isn't it reassuring to see the Indian government recognizing the importance of clear regulations for the crypto industry? By including crypto businesses under the PMLA, the Indian government has taken a positive step towards establishing a robust regulatory framework that fosters growth, security, and accountability.

This move is crucial as it enhances the legitimacy of the crypto industry in the eyes of the public. It assures investors that their interests are protected, and they can invest in the industry with confidence. The decision also reflects the global trend of recognizing the significance of clear regulations and protecting the interests of crypto investors.

Overall, the decision to bring crypto businesses under the PMLA demonstrates the government's commitment to encouraging innovation and promoting a stable financial sector. This positive step will undoubtedly help the sector as a whole, leading to its sustained growth and development.

Explore the 5 essential tax implications of owning and trading cryptocurrencies in India. Get a thorough understanding of the current laws and regulations with this comprehensive guide. Stay informed and stay ahead in the digital asset market.

5 Things you should know about Bitcoin and crypto tax

Cryptocurrency has been influencing the financial world, and it's no different in India. With the rise of digital currencies, there's a growing interest in understanding how these assets are taxed. But with complex regulations and a rapidly evolving crypto landscape, staying up-to-date on the latest developments can be challenging. 

As a crypto enthusiast or investor, it's crucial to understand the tax implications on your digital assets. Not only does this help you stay compliant with the law, but it also ensures you're making the most of your investment by managing the tax burden. Whether you're a seasoned crypto trader or just starting out, this article will help you navigate India's complex world of cryptocurrency taxes. 

By the end of this article, you'll have a clear understanding of cryptocurrency taxes and be better equipped to manage your crypto investments. So, let's dive in!

Overview of Cryptocurrency Taxes in India:

The 2022 Budget introduced Section 115BBH to tax digital assets and cryptocurrencies. According to the section, a 30% tax rate (excluding the 4% cess and surcharge) is imposed on all cryptocurrency transactions. This rate is equivalent to the highest income tax bracket in India. It applies to commercial traders, private investors, and anyone who transfers crypto assets during the fiscal year.

It is important to note that the 30% tax rate applies regardless of the nature of the income, be it from business or investment income, and there is no differentiation between short-term and long-term gains, as is the case with stocks or bonds.

When it comes to calculating crypto taxes, there are several vital points to consider:

Crypto losses cannot be subtracted from gains.

Offsets or losses from other sources of income (business, salary, or house property) cannot be included.

Carry-forwarding of crypto losses to future years for offsetting against crypto income is not permitted.

The standard for crypto taxation in India:

In the Union Budget 2022, Indian Finance Minister Nirmala Sitharaman declared that cryptocurrencies would be classified as virtual digital assets for tax purposes. 

Here's a breakdown of the tax implications for various crypto-related activities:

According to section 115BBH of the Finance Bill, the following activities involving virtual digital assets (VDAs) are subject to taxation:

Converting VDAs into Indian Rupees or any other fiat currency

Converting one VDA to another (such as crypto-to-crypto trading, including stablecoins)

Paying for goods and services using a virtual digital asset

Profits from these transactions are taxed at a rate of 30%, with an additional 1% TDS imposed for transactions above 10,000 INR. However, if an individual or HUF is a specified person,i.e. if they do not have any income from Business or Profession OR if total receipts do not exceed INR 1 crore in case of a business or INR 50 lakh in case of professional income, then no TDS u/s 194S is payable for transactions upto INR 50,000.

Other crypto-related activities, such as:

These transactions are viewed as income and taxed according to the recipient's income tax rate. However, if the recipient holds the assets and sells them later, they are liable to pay a 30% tax on any appreciation in the market value of the investment.

In India, a 30% tax on VDA (Voluntary Disclosure of Assets) transactions is imposed, and a TDS (Tax Deducted at Source) of 1% is also levied. The reason behind introducing TDS on cryptocurrency is to monitor and keep a record of investments in crypto assets made by Indian investors.

It is important to note that TDS is imposed on trades, spends, or sales and not on transferring assets from one wallet to another. Here are some critical points regarding TDS on cryptocurrency assets:

When trading through Indian exchanges, TDS will be deducted directly from transactions and submitted to the Government.

When transacting through P2P platforms, the buyer is responsible for deducting TDS.

In the case of crypto-to-crypto trades, both the buyer and seller are required to pay 1% TDS.

115BBH prohibits investors from offsetting any losses against crypto gains. Indian crypto investors are not allowed to claim any cryptocurrency-related expenses except the cost of acquisition or buy price.

Crypto Activities Exempt from Taxes in India:

Are you looking for ways to manage your tax liabilities from cryptocurrencies? There are specific scenarios where you are exempt from paying taxes on cryptocurrency, such as:

Transferring crypto from one wallet to another

Receiving a gift of cryptocurrency worth up to Rs. 50,000 from close family members. This amount can only be exempt from crypto taxes and cannot exceed this limit. (Subsequently, on selling the gift received, tax under Section 115BBH is payable)

The first step to calculating taxes on cryptocurrency transactions is to determine the capital gains. Capital gains are profits from selling or disposing of a capital asset, in this case, cryptocurrency. If an individual bought cryptocurrency worth INR 3,00,000 and sold it for INR 5,00,000, their capital gain would be INR 2,00,000. This amount is multiplied by 30% to calculate the taxable amount, which comes out to be INR 60,000 (excluding surcharge and cess). The individual will be liable to pay INR 60,000 plus a 4% cess and surcharge as the tax on their crypto income in that financial year.

It's important to note that any income derived from cryptocurrency transactions is taxed only at the time of transfer of assets. Therefore, holding onto cryptocurrency assets does not make unrealized gains taxable. In addition, the Government does not allow any expenses, other than the cost of acquisition (purchase price), to be deducted as expenses from the profit. This includes platform fees, brokerage fees, and internet charges.

Starting July 1, 2022, a 1% TDS (Tax Deductible at Source) was introduced on all crypto transactions under section 194S of the Income Tax Act. This means that for a crypto purchase worth INR 10,000, INR 100 will have to be paid as TDS, and the remaining INR 9,900 will be delivered to the seller. However, some crypto exchanges may automatically deduct the TDS and deposit it to the Government, subject to special conditions.

It's essential to remember that TDS will be imposed on all crypto transactions, including Crypto-to-Crypto Transactions. The Indian Government is taking steps to discourage short-term crypto transactions, but it has not prohibited trade in cryptocurrencies 

The tax measures taken by the Indian Government are comprehensive and clear about the extent and scope of taxes to be paid, hence there are almost no routes to evade taxes on cryptocurrencies   Consequently, all the crypto exchanges are working towards establishing platforms for compliance with the Government's directives. 

Therefore, we recommend you keep detailed records of all cryptocurrency transactions and try to find professional tax advice. Seeking the guidance of a tax professional can help you navigate the legal requirements and ensure that you abide by the laws.

Discover the latest tax laws and regulations for cryptocurrencies in 2023 for various countries and learn how it may affect your digital assets.

How do different countries tax cryptocurrencies in 2023?

Cryptocurrency has been a hot topic in the financial world for the past few years. From making headlines to capturing people's minds worldwide, virtual digital assets, NFTs, and cryptocurrency have been on the rise. However, the taxation of VDAs and cryptocurrencies is a concern for investors due to the restrictive approaches of governments worldwide.

India is one of the latest countries to make a significant decision regarding the taxation of cryptocurrencies with the introduction of section 115BBH. But it's not just India; other countries such as Singapore, and the USA also impose crypto taxes. 

How are cryptocurrencies taxed across the globe?

Here is a list of different taxation rules on cryptocurrency in other countries:

The IRS considers cryptocurrency a capital asset in the United States, meaning that investors must pay taxes on any gains from selling their crypto holdings. So, for example, if you sell your crypto within a year, you'll be subject to short-term capital gains tax, ranging from 0-37%, depending on your income. On the other hand, if you hold your crypto investment for over a year, you'll be taxed at a lower rate of 0-15% or 20% at most, depending on your marital status and income.

It's important to note that you won't have to pay any taxes on your crypto if you hold it without selling or exchanging it for a gain. And, if you incur losses from selling crypto, you can offset up to $3000 of them against your total tax bill.

In the United Kingdom, the taxation of Bitcoin and other cryptocurrencies falls under either Capital Gains Tax or Income Tax, depending on the nature of the transaction. For example, if you earn an income through cryptocurrency, you will be subject to Income Tax. On the other hand, if you make a capital gain, you will be liable for Capital Gains Tax.

It's worth noting that the UK has a unified Capital Gains Tax rate, unlike some countries that differentiate between short-term and long-term gains. So the amount of tax you pay on your capital gains will depend on your income bracket.

Please refer to the table here for a detailed understanding:

The Canadian government views cryptocurrencies, such as Bitcoin, as commodities rather than fiat currency. As a result, the taxation policies for cryptocurrencies in Canada are similar to those in the United Kingdom. For instance, the individual must pay Income Tax if the cryptocurrency is taxed as income. On the other hand, if it is taxed as a capital gain, the individual will only be required to pay Capital Gains Tax on half of the profit from cryptocurrency transactions.

The following table provides a breakdown of the percentage of taxes required to be paid on cryptocurrency transactions in Canada:

The Australian Taxation Office (ATO) views cryptocurrency as an asset, attracting both Capital Gains Tax (CGT) and Income Tax. Therefore, if you have bought, sold, or earned any income through cryptocurrency transactions, you must be aware that you must file an Income Tax Return on your overall income.

The ATO has a comprehensive system for tracking all cryptocurrency transactions. When you sign up with an Australian wallet or exchange, your Know Your Customer (KYC) data is automatically registered with the ATO. Like in Canada, the Australian government views all cryptocurrencies as property and classifies them under the asset class, thus imposing Capital Gains Tax.

However, it is essential to note that CGT will only be imposed on your cryptocurrency holdings if you dispose of them. This refers to buying, selling, exchanging, gifting, or using cryptocurrency to purchase goods or services. If you hold onto your cryptocurrency and are subject to Australian taxes, you will pay 50% less tax.

The Netherlands's taxation system is distinct from other countries and operates on a wealth tax basis rather than a capital gains tax. At the beginning of each tax year, the government presumes an interest amount on the value of assets, which is calculated by offsetting all liabilities.

If your total assets include crypto worth more than 50,000 EUR, you will be subject to a 31% wealth tax. By understanding the tax policies in different countries, crypto investors and traders can make informed decisions about their investments.

How to classify cryptocurrency events that are taxable from non-taxable ones?

Which country does not have a tax on Cryptocurrency?

There are several countries that do not impose tariffs on cryptocurrency, here is the list:

In Portugal, individuals who profit from cryptocurrency sales are exempt from capital gains taxes. However, companies receiving payment in cryptocurrency are subject to standard capital gains taxes. In addition, if cryptocurrency trading is a professional activity, taxes must be paid on profits, whereas individuals trading as a hobby are not taxed.

Germany classifies cryptocurrency as "other assets," taxed as individual income tax only if sold within a year of purchase. Long-term holdings, including profits up to 600 euros per year, are tax-exempt.

Cryptocurrency remains unregulated, mainly in Cyprus, but the Central Bank has issued warnings about potential losses. ICOs are taxable, but there are currently no mining restrictions or reporting requirements. The SEC is advocating for more oversight. Despite its 12.5% corporate tax rate, the treatment of cryptocurrencies within estates lacks a legal framework.

Singapore's Payment Services Act regulates the crypto industry while promoting growth. Trading profit from digital tokens is taxed, while long-term investment gains are exempt. The classification of gains as trading or capital depends on circumstances, including :

The Monetary Authority of Singapore aims to monitor crypto while fostering innovation.

Swiss Federal Tax Administration considers cryptocurrency an asset, not legal tender. Therefore, capital Gains Tax only applies to self-employed traders or businesses. On the other hand, individual investors are subject to Income Tax and Wealth Tax, with exemptions for holding crypto assets for six months and having a trading turnover smaller than 5x their holdings and a net capital gain smaller than 50% of their total income with no debt financing.

Bermuda's Digital Asset Business Act 2018 regulates digital business activities, including:

and offering wallet and exchange services

 The island nation attracts individuals and companies with its zero-tax policy for digital assets.

Malta, a member of the European Union, offers a tax-free environment for crypto investors. Companies like Binance, Revolut, and OKex have established operations there due to their crypto-friendly regulations. Maltese law distinguishes between coins and tokens, with profits from exchanging currencies treated like regular fiat exchange profits and mined coins considered steady income. Increased regulation may come, but non-EU wealthy crypto investors see Malta as a desirable location for now due to its low-tax environment and citizenship offer.

The taxation of cryptocurrencies is a complex and rapidly changing topic, with different countries adopting different approaches. Therefore, cryptocurrency traders must understand the taxation laws in their respective countries to ensure compliance and avoid potential penalties. From the countries we have discussed, it is evident that some countries have taken a more relaxed approach to cryptocurrency taxation, while others have implemented strict regulations.

In either case, it is essential to keep up with the latest developments and seek professional guidance, if necessary, to ensure a clear understanding of the tax implications of cryptocurrency trading. By staying informed and taking appropriate measures, cryptocurrency traders can minimize their tax burden and continue participating in this dynamic and growing market.

This article takes you on a fascinating journey through the history of money, from its earliest use in the form of seashells and bartering to the emergence of modern currency and the rise of digital cryptocurrencies like Bitcoin. Discover the key milestones in the evolution of money and the societal and technological shifts that have shaped its development.

A Brief History of Money - From Seashells to Bitcoin

What is money and where did it come from? The world today runs on money. Yet most of us don’t really know how to describe it or where the idea of money even came from. With this article, we explore what it means to call something money and how it works. Money has had a long and fascinating journey to become what it is today. From natural objects to barter and paper money to bitcoin, let’s see how money came to be.

In short, money is a representation of value. Today, money does not have any intrinsic value of its own. The only value it has is given to it. This allows us to use it to trade goods and services.

What if money did not exist? Then we would have to resort to trading directly in the items we want, like exchanging bags of rice for cattle. However, even when trading physical goods, we would hold a value in mind. For example, no one would choose to give away a flock of sheep for a handful of rice, simply because the flock is more valuable than the small quantity of food. 

Money is simply our internal valuation taking another form. While money may be a human creation, it has come about organically as the need for giving comparative value to items arose. 

Throughout history, money has been represented by seashells, stamped precious metals, paper and lines of code. It is important to distinguish between money and currency. We refer to the items above as currency, while money is a more intangible concept. Currency is only a tool used to represent money. Meanwhile, as we see from money stored with banks today, money does not always have to have a physical form. 

Whether seashells or paper currency, all money shares some basic characteristics that enable its use.

First and foremost, it is important for money to be a medium of exchange. This allows us to exchange money for various goods and services. It creates a market where money transfers can replace trying to find specific items the seller may want. 

This is also referred to as a measurement of value. Money allows us to give any good or service a fixed value. For example, Instead of having to decide how many planks of wood are of equal value to rolls of cloth, money enables both to be priced at a fixed amount. Thus, it standardises how we measure value.

Money makes it much easier for us to store wealth. If instead of your bank account you had to hold your wealth as a physical object, it would be significantly more difficult. Physical goods require enough storage space, yet might still lose value over time as the goods depreciate in quality. Money alleviates both of these concerns. 

Now that we understand what money really means, we can look at the barter system. This system is considered the precursor to money. It involves directly trading goods and services for each other. 

The biggest hurdle in this system is the “double coincidence of wants”. Suppose you have two rolls of linen and want ten planks of wood. In this situation, you have to find someone who is not just willing to give you ten planks of wood, but also willing to accept two rolls of linen in return. Therefore, both parties must want what the other person is offering. If the second party wants bags of wheat instead of linen, you will not be able to complete the exchange. 

This led to the formation of pseudo-currencies. Items like tools and weapons or salt became a more general means of exchange because many were willing to accept them. However, they were still not an effective unit of account as their value had to be negotiated for every transaction. 

For most of human history, the barter system was used. That all changed almost 2500 years ago when minted currency gained popularity. In both China and Greece, metals were used to mint coins, which were stamped to indicate authenticity and value. In the kingdom of Lydia, the coins were made from a naturally-occurring combination of silver and gold called electrum. 

Minted currency greatly benefitted both internal and external trading of the economies, helping them grow to be the richest empires of their time. 

It is believed that paper money first originated in China, given their extensive use of the commodity. Historians believe it occurred around the turn of the millennium in 1000 CE under emperor Zhenzong. However, it took some time for it to spread to the rest of the world, where coins were still the dominant form of currency. By the 18th and 19th centuries, other countries began using paper money too. However, this was usually in the form of promissory notes rather than the notes we see today. These notes promised to pay the bearer a certain amount of gold or silver. They were essential for the development of banks, as banks began to issue promissory notes and act as the assurers of their value. 

This was followed by the creation of fiat money and the gold standard. Governments around the world began to issue fiat money, which was valued at the level decided by the issuing authority. However, this form of currency had no intrinsic value, unlike gold and silver. This would have allowed governments to issue as many notes as they wished.

To combat this, the United Kingdom introduced the Gold Standard in 1821, which was adopted by other countries soon after. This would keep the value of fiat currency tied to a fixed quantity of gold. Changing the value of a currency would also involve changing this amount of gold. 

However, this system also had its drawbacks like an inability to control inflation. This led to today’s system of free exchange rates where countries decide on their exchange rate regime individually. 

It took a long time to move from coins to paper, but the shift from paper to newer forms of money has been more rapid. The 1960s led to the development of plastic money in the form of debit and credit cards. The magnetic strip on the back allowed for scanners to automatically obtain account information to complete transactions. The introduction of embedded chips also improved the security of the service. 

Second, net banking and mobile payments came into existence. This enabled users to make payments simply with their electronic devices, without ever having to hold a form of currency. All transactions in this system take place digitally where the buyer and seller need not exchange physical forms of payment. 

Finally, this brings us to the creation of crypto assets. These exist as lines of code on a blockchain, which is a publicly available ledger. The first token of this form is Bitcoin, which was launched in 2009 by an anonymous person or group known as Satoshi Nakamoto. The token is not issued by a central authority. Rather, it operates on a decentralised network of computer systems. 

These tokens, like fiat currencies, do not have any value of their own. However, in this case, it is the token's users who grant it its value through trading on crypto exchanges and using it for goods and services. Today, the Bitcoin price is over $23,000 per token.

The use of crypto tokens provides users with anonymity, convenience and a system of payments separate from any central authorities. While this is still an emerging industry, many users already make transactions using crypto. 

Currency has taken a long time and has gone through many variations to get to where it is today. With every iteration, it has only emerged as a better tool to enable people and economies worldwide. Digital assets and crypto tokens are further improvements to this formula, introducing new advantages to the landscape of payments. They provide more security and allow decentralised communities of users to decide their value.

This article provides a comprehensive guide to help Indian taxpayers understand and file their cryptocurrency taxes for the financial year 2022-23. It covers everything from the tax implications of buying and selling crypto to how to calculate your gains and losses and includes tips to ensure you remain tax compliant.

Crypto Tax in India: A Complete Handbook for 2023

As per the Finance Bill 2022,  any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically

These Virtual Digital Assets represent a Store of Value and cannot be used to buy Goods and Services

Any other digital asset, as the Central Government may, notification in Official Gazette specify:  Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of a virtual digital asset subject to such conditions as may be specified therein

Income or Profits made from VDAs are taxable at a flat rate of 30%.

The Flat rate of 30% applies irrespective of
1. Holding period
2. Individual Tax Bracket
3. The nature of the transaction
4. Whether you are a private investor or a commercial investor

VDAs are taxed under “Income from other sources” similar to lottery winnings, and income from interest on FDs

Cryptos fall under the definition of Virtual Digital Assets as per the Finance Bill 2022. Income or Profits generated from the Sale of Cryptos are taxable at a Flat rate of 30% without exception

Non Fungible tokens ( NFTs) are included in the definition of Virtual Digital Assets as per the Finance Bill of 2022. Income or Profits generated from the Sale of NFTs are taxable at a Flat rate of 30% without exception. 

The Finance Bill has not specifically mentioned Stablecoins. Since Stablecoins are also based on Cryptography, they would have to meet the criteria of VDAs. However, the Central Government may choose to notify or denotify them as mentioned above.

The Finance Bill has not specifically mentioned Tokens. Since Tokens are also based on Cryptography, they would have to meet the criteria of VDAs. However, the Central Government may choose to notify or denotify them as mentioned above.

More details on different Crypto income sources

The Finance Bill 2022 has not mentioned any details about Crypto mining, staking, lending, and borrowing. It is advisable to speak to an expert in such matters. Income earned through interest from such scenarios can be included under “ Income from other sources” in your IT returns. The Applicable tax rates, in this case, would be the slab rates as per taxpayer income. However, it is safer to keep these earnings under the VDA bracket.

Tax deduction at source (“TDS”) will be applicable on the transfer of ‘Virtual Digital Assets’, including crypto assets and NFTs, from July 1st, 2022, as per Section 194S of the Income Tax Act. 

One of two slabs of TDS applies to a crypto asset transfer

(a) 1% - if the receiver has filed Income Tax Returns, or 

(b) 5% - if the receiver is a specified person under Section 206AB of the Income Tax Act. In either case, the TDS is on the net transaction value.

The deducted TDS amount will reflect in your Form 26AS within the prescribed timeline of TDS return filing. This tax can be claimed from the Income Tax department while filing your yearly income tax return. 

INR-to-Crypto (F2C) Buy Orders - No TDS applicable 

Crypto-to-INR (C2F) Sell Orders - 1% TDS applicable on net order value 

Crypto-to-Crypto (C2C) Buy & Sell Orders - 1% TDS applicable on net order value 

Illustration: Let us explain how a TDS deduction happens on Zebpay through an example

Your order information will appear as follows if you make a Sell order for 1 BTC at INR 20,00,000:

Transaction fees* (0.25% of 20,00,000) = INR 5,000

TDS applicable (1% of 19,95,000) = INR 19,950

Final Calculation (Actual receivable amount) = INR 20,00,000 - (5,000+19,950) = 1,975,050

*Transaction Fees may vary depending on the tier you belong to. 

TDS deductions made in respect of your transfers will be specified in the ZebPay app.

With a recent amendment during the budget session on 1st February 2023, the Government has also introduced penalties for missing out on the TDS. Such as: 

A penalty for non-payment of crypto TDS or hiding the information: Equal to unpaid TDS

A potential jail sentence can range from 3 months to 7 years on missing out or hiding the TDS

Interest at 15% p.a for late payment of the TDS

*The examples shown are for illustrative purposes only

Taxes when there is a combination of Profit and loss:

Can Capital losses be offset by Capital gains?

No. As shown in the example in the previous section( Table 3.0), Capital losses cannot be offset by Capital gains. While there is no tax applicable to losses on the sale of Crypto, profits are taxable at a flat rate of 30%.

Are there any Crypto transactions that are not taxable?

Transfer of Crypto assets from one wallet to another of the same person is not Taxable

HODLing is not taxable. HODLing is when an investor holds a Crypto asset or stores a Crypto asset in his/her wallet ( wallet could be an exchange wallet or a personal wallet) without selling it. 

Can there be a carry forward of loss/profit from one financial year to the next?

The loss on Crypto in one financial year cannot be set off against a profit made in another year. Taxes applicable on Crypto earnings are payable every year.

The Income-tax Act has a special provision for taxation on movable and immovable gifts. Gifts from relatives are exempted as per the IT Act irrespective of the value. People who receive Crypto as a gift must do their due diligence to see who fits the definition of “ relatives” as per the IT Act. Any gift which exceeds the amount of INR 50,000 from a non-relative will be taxable at the hands of the recipient based on the occasion on which the gift is being received.

What about earnings from Play to Earn or Move to Earn games?

Earnings through games and airdrops can be considered Gifts as per the Income-tax Act. The rules mentioned in the previous paragraph apply in the case of Gifts.

There is no clear definition of how P2P transfers will be taxed at the moment. But, it is safe to assume that a flat tax rate of 30% is applicable when any Crypto received through P2P is sold and profits are made from the sale

I am not 18 years old yet and I own Crypto, what should I do in this case?

Crypto trading is not restricted to majors. Anyone who has a PAN card and books profits from Crypto assets is liable to pay all taxes without exception. Investors and traders are required to know all tax compliance laws.

Can I accept Crypto as a medium of exchange for goods and services?

The Govt has clarified that Virtual Digital Assets are not a form of currency. As per the mandate, Crypto assets cannot be used as a medium of exchange for goods and services. They can only be used as an asset class.

Will there be any applicable taxes if I transfer Crypto between two wallets I own?

Transfer of Crypto assets from one wallet to another of the same person is not taxable 

How to report Crypto earnings in your ITR?

All gains made on Crypto gains must be reported in the ITR 

Gains must be reported under “ Income from other sources” in the ITR form

A Flat 30% tax will be applicable on gains made on all Virtual Digital Assets 

New taxation rules are to be applied from the Financial year 2022-23

The article covers some of the common terms used in cryptocurrency like HODL, Altcoin

A Simplified beginner’s guide to Crypto basics

If you’ve been following crypto news, you’re probably aware of the exponential growth of crypto assets over the years. Numerous new cryptos are cropping up every day, some with super low fees and some with outrageous returns. However, the information available to investors can be confusing and contradictory, so we’ve put together this guide on basic terms you need to know about crypto right now—from ICOs and HODLs to blockchain technology. If you are interested in entering the world of crypto, this article has insights that will help you make an informed decision.

Bitcoin was one of the first cryptos ever created. The concept of Bitcoin was introduced in 2008 by an unidentified programmer, or group of programmers, under the pseudonym Satoshi Nakamoto. Among the cryptos available, Bitcoin remains by far the most popular. The creation of new coins is capped at a total supply of 21 million coins. The bitcoin trading volume is now at USD 454.8 Billion.

Altcoins are a catch-all term for any cryptos that are not Bitcoin. They could include anything from the incredibly popular Ethereum to the meme-worthy Dogecoin. Of course, if you are new to this, stick to the more renowned altcoins out there, and you should be fine.

The technology underlying crypto is called the blockchain. It is a decentralised system that is not controlled by a government or a financial body. It functions as a register of every crypto transaction completed on that respective peer-to-peer network, which is shared across nodes periodically. Not only does this govern how coins are mined, but it also prevents counterfeits.

A block is a grouping of user transaction data on a blockchain. Blocks are periodically added to the blockchain, though the time it takes to mine a block differs between cryptos. For Bitcoin, it’s 10 minutes. For Ethereum, it's closer to 15 seconds. Once a user (typically the one with the most processing power) is allowed to mine a block, they get coins for their efforts.

Wallets sound exactly like the word suggests. They are a way to store any crypto you earn or purchase. Specifically, they store the private and public access keys you need to claim your coins. “Hot” wallets are ones you frequently use for online trading, so they’re more likely programs or online services. “Cold” wallets are for cryptos you want to save or hold for a while. This usually means keys stored on a hard disk or even a piece of paper.

A crypto exchange is a digital marketplace where you can buy and sell bitcoins and altcoins. 

We’ve already established how cryptos are decentralised. Changing the process isn’t up to a single authority but rather a majority decision. Forks are when such changes happen, resulting in a bifurcating blockchain. One continues along the old path while the other follows the new one, often resulting in spinoff altcoins.

Acronym for “Holding on for Dear Life”. This is crypto speak for an investment strategy where you buy and then hold on to cryptos instead of trading them as soon as the rate is a little higher. It’s essentially putting that share of coins on ice, earning no immediate returns for you, and hoping the exchange rate will drastically improve down the line.

An Initial Coin Offering (ICO) is how funds are raised for new crypto projects, this is similar to Initial Public Offerings (IPOs) in the stock market. Though getting in on the ground floor is the best way to earn a profit margin on a potentially successful new crypto, it’s also far too commonly used as a scam tactic, so be on your toes.

While it may seem intimidating at first, we hope that the information in this guide makes it a little less so. Even if you're new to crypto, your knowledge will only expand over time. As with any investment or venture, you should be prepared for significant fluctuations in value and rapid changes in fortune.