In his Union Budget speech for the year 2022, Finance Minister Nirmala Sitharaman proposed a tax of 30% on profits earned from the sale of cryptocurrency assets in India. This proposal has generated a lot of buzz in the crypto community, with many people wondering how this will impact them. In this blog post, we will discuss the implications of the Crypto tax in India and what it means for you.
A cryptocurrency can be defined as a decentralized digital asset and a medium of exchange based on blockchain technology.
Table of Contents
What are cryptocurrencies?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
What is the tax proposal for cryptocurrencies?
The tax proposal states that any profits earned from the sale of cryptocurrency assets will be taxed at 30%. This tax will be levied on both individuals and businesses. And 1 percent TDS will come into effect from July 1, 2022, while the gains will be taxed effectively on April 1.
What are the implications of this Crypto tax in India?
There are a few implications of this tax proposal:
-The tax will apply to all crypto assets, including but not limited to Bitcoin, Ethereum, Litecoin, etc.
-The tax will be levied on both individuals and businesses.
-The tax will apply to all profits earned from the sale of cryptocurrency assets, regardless of whether they are sold for fiat currency or another cryptocurrency.
What does the Crypto tax proposal mean for you?
If you are an individual who owns cryptocurrency assets, this tax proposal means that you will be taxed at 30% on any profits you earn from selling those assets. If you are a business that deals in cryptocurrency, this tax proposal means that you will be taxed at 30% on any profits you earn from selling cryptocurrency assets.
Crypto tax in India
From April 1, a 30 percent income tax plus cess and surcharges will be levied on such transactions in the same manner as the tax law treats winnings from horse races or other speculative transactions.
–> BUDGET 2022 LEVIES 30% TAX & TDS ON CRYPTO ASSETS
The tax on cryptocurrency in India has been a topic of debate for a long time now. The government had earlier formed a panel to study the matter and make recommendations.
In his Union Budget speech for the year 2022, Finance Minister Nirmala Sitharaman proposed a tax of 30% on profits earned from the sale of cryptocurrency assets in India. This proposal has generated a lot of buzz in the crypto community, with many people wondering how this will impact them.
The provisions related to 1 percent TDS will come into effect from July 1, 2022, while the gains will be taxed effectively on April 1.
How crypto tax calculated
For example,
Say you invested Rs. 1 lakh in cryptos and earned Rs. 30,000 as profit.
Tax applicable = Rs. 9,000 (30% of Rs. 30,000)
Moreover, investors will not be allowed to set off losses incurred from cryptos against any other capital gain.
Furthermore, you will also have to pay a 1% TDS (tax deducted at source) whenever you sell cryptos.
Is crypto a ‘currency’ or an ‘asset’?
This is an important question because it will determine how the tax on cryptocurrency is calculated. If crypto is considered a currency, then any gains made from its sale will be treated as business income and taxed accordingly. However, if crypto is considered an asset, then the tax will be calculated based on the capital gains tax rules.
Both long-term and short-term gains will be taxed at 30 percent after indexation.
Faq
Q – What is the tax slab for crypto tax?
A – The tax rate is 30% for both individuals and businesses.
Q – How much TDS will be deducted?
A- TDS of 1 percent will be deducted on income earned from the sale of cryptocurrency assets.TDS is not an additional tax. It will be deducted by the exchange when you sell your cryptos and will be deposited against your PAN. You can claim the credit for it when you file your income tax return for the year.
Q – When will this tax come into effect?
A- The tax will come into effect from April 2022 and TDS will be deducted from July 2022.
Q – Will losses from cryptocurrency investments be tax-deductible?
A- No, losses incurred from cryptocurrency investing cannot be set off against any other capital gain. Cryptocurrency is taxed as a speculative asset in India. This means that any gains made from its sale will be treated as business income and taxed
Q- What is the tax on short-term and long-term gains?
A – Short-term and long-term gains will both be taxed at 30%. However, long-term gains will be indexed for inflation.
Q – If someone gifts cryptos or NFTs who will pay the tax?
A – If someone gifts cryptos or NFTs, then that will be taxable in the hands of the receiver. So, if you have received any virtual digital asset as a gift it will be taxed in your hands.