How is Crypto Taxed in India?

How to File your crypto taxes?
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Demystifying taxes for your crypto investments

While cryptocurrencies and NFT investments are currently lacking clear regulations in India, the government in playing an active role by implementing a new tax regime aimed at taxing gains as well as TDS on your virtual digital assets (VDAs). In today’s article we try to decrypt the crypto taxes and how you as an investor can become compliant by adhering to these regulations.

How are crypto taxed in India:

In the 2022-23 union budget, the government announced that gains from crypto assets would be taxed at 30%, regardless of an individual's income tax slab rate under section 115BBH effective on or after April 1, 2022. In comparison to the individual income tax rates, this rate is the same as India's highest Income Tax bracket (excluding surcharge and cess).

Further, in order to ensure all our crypto investments and transactions are recorded, the government announced a 1% Tax at Source (TDS) on the transfer of crypto assets for all the transactions on or after July 1, 2022 under section 194S. 

Key points:

  • Gains are taxed at 30% under section 115 BBH
  • 1% Tax at Source (TDS) on all transactions
  • These tax rates are applicable on all forms of VDAs (Virtual digital assets) 
  • Losses can’t be offset with other asset classes or carried forward. For instance, if a person were to sell an NFT and incur a loss, the loss cannot be set-off against a gain made on the transfer of another VDA

How to File your crypto taxes:

You can file your crypto taxes for FY 2022-23 (AY 2023-24) using the Income Tax Form ITR-2 (reporting as capital gains) or ITR-3 (reporting as Business Income). There are few Cryptocurrency Tax solutions such as KoinX, Koinly, Binocs that will assist you with tax calculations by simply uploading a CSV file of your transaction history. We at Giottus have partnered with KoinX to assist our users with their tax calculations. 

FAQs:

What comes under the umbrella term virtual digital assets?

All cryptocurrencies and non-fungible tokens (NFTs) come under this definition.

Will I be taxed on the trade or on the profits only?

Investors will be taxed only on the profits and not on the principal. If you invest Rs.100 and you sell at Rs.120, you will be taxed 30% on Rs.20 only. Also, if you sell at Rs.80 after investing Rs.100, you will not be taxed on the losses.

What is this 1% TDS?

For easy bookkeeping and to prevent tax evasion, all transactions in the said financial year above a threshold (Rs.50,000) will have a 1% TDS applied automatically. This will be enabled by the exchanges and all services that engage in crypto transactions. 

Will you pay tax when you buy crypto in India?

You don't currently pay tax when you buy crypto with fiat currency like INR. However, if you are purchasing crypto through a P2P platform or international exchanges, you will be required to deduct 1% TDS, file the TDS return and remit the balance amount to the seller’s account.

Is this TDS an additional tax?

No, the TDS can be offset at the end of the year when you declare your income tax. If you had paid Rs.5,000 as TDS till date and your income tax for the year is Rs.12,000, you would only need to pay Rs.7,000.

I made a loss of Rs.10,000 in crypto this year. Can I reduce it from my taxable income?

No, you will not be able to offset or deduct this loss from other income/gains. Also, you can’t carry forward the loss to next financial year.

A friend/relative sent me Rs.1,000 worth of crypto as a gift. Should I declare it as an income?

Yes, however you do not need to pay taxes on receiving a gift of crypto up to Rs.50,000 from friends and relatives. Above Rs.50,000 you'll be liable for Income Tax at your applicable slab rate on that gift.

What if I earn crypto via mining or staking?

They will likely need to be declared as income and hence will be taxed. The Government has also confirmed that expenditure incurred in mining cryptocurrency is considered capital expenditure and not a cost of acquisition. Therefore, the considerable expenditure on the hardware required to mine cryptocurrency cannot be deducted from any income derived from the transfer of cryptocurrency

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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