In the AMA with Unocoin, Avinash Shekhar, CEO & Founder of TaxNodes spoke about the two most crucial topics - Crypto and Tax. This session also covered how can you become more well-versed in taxation, especially with Indian regulations.

What is the new regulatory process introduced by the Indian Government?

The government introduced a specific tax on cryptocurrencies on April 1st, 2022. It is a common misconception that before April 2022, there was no tax on cryptocurrency which is untrue. In India, if you have an income from any method, whether it is categorised in a special category by the government or not, it is taxable. So if you have made any transactions before 2022 and made any profit on them, that profit is also taxable based on the old income tax law.

From April 2022, the government announced that crypto will be treated as a speculative income and taxed at 30%. Secondly, no set-offs will be allowed. You will have to pay tax on the entire profit you made. It can be an upsetting situation as your taxes can be higher than your profit.

Thirdly, the government said carrying forward losses will also not be allowed. This means if you incurred any loss this year, you cannot carry forward it to next year and adjust with the profit you make in the next year.

Fourthly, the government said that 1% TDS will be deducted from every transaction an individual makes. This regulation brought the most negative impact on the crypto industry. This means whenever you sell any cryptocurrency, you will get the amount after a 1% TDS deduction and you will get that amount refunded after filing your ITR.

Is there a way to minimise tax liability in crypto in India?

As of now, there is only one way to minimise tax liability - HODL. Buy and hodl cryptocurrencies. If you are a trader then it is a different scenario but if you are not a trader, then buy and HODL your cryptocurrencies for a couple of years and then make sure to pay the due tax amount whenever you sell it and make profits from it.

If you have done a P2P transaction in your bank account, will you have to pay tax on it?

Firstly, beware of who the other person is with whom you are doing P2P transactions. These days a lot of online scams are going on, you can’t be sure if the other person’s money is legitimate or not. If you are doing P2P transactions with your friends and family then you are safe, but if not then it is risky.

Secondly, if you are doing the transaction through a crypto exchange then the exchange platform will pay the 1% TDS to the government on your behalf. In this case, you don’t have to fill up any form and submit it to the government. But, if you are doing a P2P transaction on your own, then you are responsible for depositing the 1% TDS and it has a lot of aspects to it like interest, penalties and more. It is a very tedious process.

Thirdly, it is a taxable transaction. If you have made a profit from selling crypto in P2P, then you will have to pay tax on the profit you made.

Are there any exemptions or deductions available on crypto income?

Unfortunately, there are no exemptions or deductions available on crypto income as of now. It is important to note that while making a transaction if TDS has been deducted then the government has the information of the transaction along with your PAN number, so if you think you can skip filing taxes on this income then it is very risky and very likely that you will get a notice from the Income Tax Department. So it is important to always pay your taxes.

We hope this blog was informative and helpful for you. To keep learning more about new laws and regulations on cryptocurrencies in India, keep reading our blogs.

byShelja Rathi

•