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Know everything about Indian Crypto Tax System

In India, does cryptocurrency have to be taxed? Do you want to know how the Indian Income Tax Department (ITD) feels about Bitcoin and other cryptocurrencies? In our comprehensive guide on cryptocurrency taxes for 2022 and beyond, we’ve covered all you need to know about crypto tax India.

Cryptocurrency taxes in India?

In India, cryptocurrencies are indeed taxed.

Prior to 2022, neither the classification of crypto assets nor the ensuing taxation of Bitcoin and other cryptocurrencies had an official stance from the Indian government. But recently, the Indian government officially recognised cryptocurrencies as legal tender by designating them as Virtual Digital Assets (VDAs) and establishing a taxation framework for VDAs, often known as crypto.

Which taxes on cryptocurrency will you have to pay in India?

You must pay a 30% tax on any cryptocurrency trading, selling, or spending earnings as well as a 1% TDS tax on any sales of cryptocurrency assets that exceed RS 50,000 in a single fiscal year. If it is determined that you are receiving other cryptocurrency income, such as through mining or staking, you may also be required to pay income tax at your individual tax rate when it is received. 

In India, how is cryptocurrency taxed?

The phrase “Virtual Digital Assets” is defined in Section 2(47A) of the Income Tax Act by the ITD (VDAs). The definition goes into great length, but in essence it includes all types of crypto assets, such as cryptocurrencies, NFTs, tokens, and more.

The finance minister included Section 115 BBH in the 2022 budget. On gains obtained from trading cryptocurrencies on or after April 1, 2022, this clause imposes a 30% tax (plus any relevant surcharge and 4% cess).

The highest income tax bracket in India is equal to this rate (excluding surcharge and cess). Private investors, professional traders, and anybody else who transfers digital assets throughout a particular fiscal year are subject to the tax rate. 

Additionally, the 30% tax rate will be applicable regardless of the type of income; hence, there is no distinction between income from investments and income from businesses, nor is there one between short-term and long-term gains.

Cryptocurrency is subject to other taxes besides the 30% levy. To guarantee that all cryptocurrency transactions are recorded, another clause, 194S, imposes a 1% Tax at Source (TDS) on the transfer of cryptocurrency assets on or after July 1, 2022, if cryptocurrency transactions reach RS50,000 in a fiscal year (or RS10,000 in certain circumstances).

How to calculate cryptocurrency taxes?

How do you determine your profits when you know you’ll pay a flat 30% tax on them?

You must first determine your cost basis.

Your cost basis is the amount you paid to purchase your cryptocurrency, or its fair market worth (in INR) on the day you received it. The ITD does not allow you to increase your cost basis by items like buy or sell fees, in contrast to most other tax offices.

When you are aware of your cost basis, deduct it from the sale price.

Instead, deduct your cost basis from the cryptocurrency’s fair market value in Indian rupees on the day you sold it if you instead traded or spent it.

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