Cryptocurrencies are the next big thing that has been talked about and discussed. People have realised that cryptocurrency is not limited to Bitcoin, and hundreds of others are available to buy and sell. But do you know you have crypto tax? This article is about ten essential things about crypto tax in India.

Ten things about crypto tax in India

Everyone who deals in cryptocurrencies must pay a tax similar to the income tax you pay towards your regular income. Below are ten things for you to know and understand.

Does the Indian Government levy tax on crypto?

Yes, the Indian government levies tax on cryptocurrency. Before April 2022 crypto income was taxable as per normal slab rates. However, it was the first time, in 2022, that the Indian government classified cryptocurrencies as a part of Virtual Digital Assets. Post this time, the transactions involving the transfer of VDAs were considered under the purview of the Income Tax Act.

How much ax do you pay on crypto?

Any gain from trading of VDAs will attract a 30% tax and 1% TDS tax on the transfer of VDAs exceeding Rs.50,000 and in some cases, the amount is Rs. 10,000 in a financial year. 

If you earn any other income in crypto, such as from mining or stalking, you may even have to pay an income tax upon receipt per your tax slab rate.

How is cryptocurrency taxed in India?

It is under section 2(47A) and governed under section 115 BBH as per the Income Tax Act. This section includes all crypto assets, such as cryptocurrencies, tokens, and NFTs.

When do you need to pay the tax?

You will have to pay a 30% tax on the below transactions:

• When you will be trading crypto for other cryptos.
• When you are selling crypto for any fiat currency, including Indian rupees.

Additionally, the tax is subjected to individual's specific slab rates.

• When you receive crypto as a gift.
• When you are mining crypto coins.
• When you are getting paid in crypto.
• In the case of staking rewards.
• Airdrops

What all are included in DeFi income?

The following transactions are considered as a part of DeFi income:

• Earning new governance, liquidity mining tokens, or reward tokens.
• In the case of earning referral rewards.
• When you play to earn income.
• Browse to gain platforms such as bravo or permission.io.

How much is the TDS on crypto assets?

You will have to pay 1% TDS on transferring any crypto assets. In the case of crypto-to-crypto trades, the TDS will be applied to both parties.

What are the new penalties to avoid TDS?

There are two sections under which the crypto investors can be levied penalties, and the same are as below:

• Liability for failure to deduct 1% TDS according to Section 271C - If the taxpayer fails to deduct the TDS, they must pay the fine equal to the amount due.
• Case of failure to pay the TDS under Section 276B - If the taxpayer fails to pay the TDS to the government, they can be imprisoned for three months to 7 years.

What happens in case of crypto losses?

Section 115 BBH forbids offsetting any crypto losses against crypto gains or any other income or gain. A crypto investor in India cannot claim crypto-related expenses apart from the cost of acquisition.

Any exceptional cases where there is no tax on crypto?

There are only a few cases when you don’t have to pay Tax on your crypto assets:

• When you are holding crypto.
• When you are transferring cryptos between your wallets.
• When the crypto gift you received is up to Rs. 50,000 from relatives and friends.

How are crypto airdrops taxed?

Crypto airdrops are similar to receiving a gift and will be taxed based on your tax slab. However, if the value of airdrops is up to Rs. 50,000 in a financial year, you can claim a tax exemption.

Conclusion

Cryptocurrencies are the next big thing, and since the government has recognised them as virtual digital assets, it is essential to understand how they will be taxed and calculated. To know more about tax on cryptocurrency in India, read our comprehensive crypto guide here.