This article is all about Cryptocurrency in India and cryptocurrency income and tax laws in India.
Historically, India’s government has taken no formal position on how bitcoin and other cryptocurrencies should be classified and taxed. We’ll finally have a clearer, albeit simplified, tax structure to follow by February 2022, but it’s bad news for Indian crypto investors. This was declared in India’s Minister of Finance’s Budget 2022-2033 address, in which he suggested that all cryptocurrencies, including NFTs, be categorized as Virtual Digital Assets and taxed as income rather than capital assets.
Cryptocurrency profits are taxed in India. Although their unregulated position may cause confusion, they are subject to conventional Income Tax rules, as the Income Tax Act states that all income is taxable. It implies that all income, whether legitimate or criminal, is taxed. Crypto is a kind of payment in this case.
The nature of the service(s) provided remains unchanged. A digital marketing freelancer, for example, may provide services to both domestic and international clients and be paid in fiat currencies such as INR or USD. The freelancer can get paid in cryptocurrency as well, but the nature of the transaction stays the same in this scenario, which is a commercial transaction. As a result, it will be taxed as a company profit.
The terms “crypto trading” and “crypto investment” are not interchangeable. Trading is purchasing and selling crypto assets on a regular basis in order to profit from price fluctuations in a short period of time, and then repeating the process. Investors, on the other hand, might be either short-term or long-term. These investors, as the name implies, either keep an asset for the short or long term, but the goal is to trade often.
Here are 4 Important Things About Cryptocurrency Income And Tax Laws In India
1. Income Tax on crypto in India
In India, there is no explicit Bitcoin or cryptocurrency tax. Instead, India intends to tax cryptocurrency as Income from Other Sources, similar to how savings bank account interest, fixed deposit interest, and lottery winnings are taxed. Profits from the transfer of virtual digital assets like bitcoin and NFTs will also be taxed at a flat rate of 30%. This is the same rate as the top income tax bracket in India. Private investors, business traders, and anybody else who moves crypto assets in a particular fiscal year are all subject to the flat income tax rate.
The 30 percent flat tax rate will apply regardless of the kind of income, such as investment or company income. Additionally, there are no boundaries between short-term and long-term rewards. Individual income tax brackets have no bearing on the 30% flat tax. There will be a holding time. The nature of the transaction Whether you’re an individual investor or a business trader, we’ve got you covered. It’s worth noting that in FY 2020-21, Income Tax only applies to citizens having a total income of more than Rs 2.5 lakh.
Selling crypto for INR or another fiat money is one example of a taxable crypto transfer. Stablecoins, as well as other cryptocurrencies, are traded for other cryptocurrencies. Buying and selling products and services with cryptocurrency. Giving cryptocurrency as a gift Other forms of revenue might be obtained via mining coins.
2. 1% TDS on Crypto Assets
Tax Deducted at Source (TDS) would be levied on payments for the transfer of crypto assets at a rate of 1% for transactions over a specified level, according to the Budget 2022 release. The government, on the other hand, has not specified what this ‘threshold’ would be. TDS of 1% was implemented to gather transaction information and maintain track of crypto asset investments. As a result, each time you buy a crypto asset (up to a specified level), you must deduct 1% TDS from the transaction value in the financial year.
3. Crypto taxation on losses
Crypto losses cannot be adjusted against any other profits or income in India since it is not considered as an asset but rather as income. In addition, crypto investors in India are not permitted to deduct crypto-related costs. The cost of obtaining your crypto asset is the only exemption, which can be claimed. Losses from digital assets cannot be offset against other income, and no deductions will be permitted when reporting revenue from the transfer of digital assets, save for the cost of purchase.
4. Disclosure of Cryptocurrency Earnings
It is certainly true that citizens earning more than Rs 50 lakh per year are required to disclose their assets and obligations, as well as the cost of obtaining, in the Schedule of Assets and Liabilities. Because digital currencies are also resources, residents must keep them in mind when implementing the aforementioned strategy. Furthermore, individuals who are residents and common occupiers must also find unusual pay and resources in their expenditure forms.
If the assessment and corrective outcomes under the Act and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 are taken into account, it may be a good idea for citizens to report digital currency assets in the unknown resources or Income Schedule. Until recently, there have been no official announcements or guidelines regarding the acceptance of cryptographic money and the weight of evaluation imposed on it. As a result, we’ll have to wait for government regulations to learn more about taxation of digital currency.