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.
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.
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.
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.
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.
You will have to pay a 30% tax on the below transactions:
Additionally, the tax is subjected to individual's specific slab rates.
The following transactions are considered as a part of DeFi income:
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.
There are two sections under which the crypto investors can be levied penalties, and the same are as below:
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.
There are only a few cases when you don’t have to pay Tax on your crypto assets:
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.
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.