The author is the CEO of Giottus Crypto Exchange
After some anxious months of uncertainty around the regulatory treatment of the crypto asset class, the Indian Finance Minister today, in her Budget speech, has laid out plans to tax all gains from virtual digital assets (includes crypto and NFTs) at 30%. This has been received with cheers and relief from the industry as a whole while some of the aspects do require further clarity. We believe that this announcement lays the foundation for legitimizing the crypto asset ecosystem in India with formal regulations going forward. With this positive thought, we try to answer some of the queries you may have at this point in time.
Summary of the Crypto Tax Regime
Key announcements made in the budget today include -
- - Income from virtual digital assets to be taxed at 30% (Cost of acquisition can be deducted).
- - 1% TDS (tax deducted at source) for transactions above certain threshold.
- - Gifts to be taxed in the hands of the recipient.
- - Losses canâ€™t be offset with other asset classes or carried forward.
- - RBI to create India's CBDC (central bank digital currency).
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 above a threshold (the number will be clarified soon) will have a 1% TDS applied automatically. This will be enabled by the exchanges and all services that engage in crypto transactions. If the threshold is say Rs.1 lac and an investor buys crypto for the same amount, Rs.1,000 will be deducted as TDS.
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 canâ€™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, you will need to pay 30% tax on this gift.
What if I earn crypto via mining or staking?
They will likely need to be declared as income and hence will be taxed.
Will this tax regime be retrospectively applied to the past?
We do not believe it will be.
How will the digital rupee or the CBDC that RBI is creating help the nation?
The issuance of a central bank digital currency (CBDC) by the RBI will enable an efficient transfer of the currency much like UPI, IMPS or NEFT. This can make transfers cheaper and enable 24x7 serviceability.
What else should I need to know?
India is likely to regulate the crypto asset ecosystem in the coming months. These announcements pave the way for stronger retail adoption as well as ease of operations for everyone involved. Overall, the ecosystem along with its businesses and investors are primed for growth in the upcoming future. The Government, we believe, has already laid the foundation for a future thriving and sustaining industry.
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Disclaimer:This article was authored by Giottus Cryptocurrency 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.