It's a big day for the crypto industry in India as several income tax proposals, including 30 per cent tax on income from trade in cryptocurrencies, will come into effect from Friday. Finance Minister Nirmala Sitharaman, in her fourth Budget speech, announced a hefty 30 per cent tax on income from digital assets, which include cryptocurrencies.
For years, cryptocurrency seemed like the kind of fleeting tech trend most people could safely ignore but its power, both economic and cultural, has become too big to overlook. According to the Statista Global Consumer Survey, Nigeria, in India, the number of crypto users and owners more than doubled from 7 per cent to 18 per cent over the three years.
As the new tax law comes into effect today, let's take a detailed look at the rules for investors:
30% tax on digital assets
The government will levy a 30 per cent tax on gains made from any other private digital assets from April 1. For example, if you have purchased cryptocurrencies worth Rs 5,000 and sell them for Rs 5,500, only Rs 500 will be taxed at 30 per cent and not the entire investment.
“Flat 30 per cent tax will apply on profit from transfer or sale of digital assets including crypto and NFTs from next financial year (FY 2022-23). Investors should also keep in mind that crypto losses can’t be set off or carried forward”, Balwant Jain, Tax and Investment expert told Financial Express.
The investors will have to pay 30 per cent tax on crypto irrespective of their tax slab as no deduction in respect of any expenditure or allowance shall be allowed while computing income from transactions in such assets. The government has also specified that losses from the transfer of virtual digital assets will not be allowed to be set off against any other income.
Also read — Taxation of cryptocurrency: Cryptic or Clear?
1% TDS on cryptocurrency transactions
The Budget 2022-23 also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which includes individuals/HUFs who are required to get their accounts audited under the I-T Act. The provisions related to 1 per cent TDS will come into effect from July 1, 2022.
Crypto mining cost not allowed as deduction
Infrastructure costs incurred in the mining of cryptocurrencies or any virtual digital assets will not be allowed as a deduction under the Income Tax Act, Minister of State for Finance Pankaj Chaudhary said.
The minister said that while computing the income from transfer of Virtual Digital Assets (VDA), no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed.
Another important point to be noted is that the investors will not have to pay tax for just holding cryptos or NFTs, it is taxable only when they earn income from transactions, transfers or exchanges of the digital assets.
Crypto received as a gift would be taxable
If you receive a gift in form of cryptocurrency or any other virtual digital asset, it would be liable for taxation as a gift post-Budget 2022.
Where the crypto hype is taking over
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