Do you regularly trade or invest in cryptocurrencies or other virtual digital assets?
If you answer yes, you must pay cryptocurrency taxes in India.
But how much are you aware of laws on crypto tax in India? How much are you liable to pay on profits? What about airdrops, minting, mining, or NFTs? And what about crypto donations?
All these situations and scenarios require you to understand the entire crypto landscape of India in detail. Anybody investing in or trading cryptocurrencies or similar assets is supposed to pay crypto tax in India.
But how much?
And what about the different types of transactions? How does India crypto tax work?
How Is Cryptocurrency Taxed In India?
Until 2022, there was no tax on crypto in india or related virtual assets.
However, with India’s 2022 financial budget, things took a turn as the government introduced a bill introducing a crypto tax in India.
India considers crypto to be a virtual digital asset that is very well taxable. And this means you’re liable to pay a 30% tax on profits from trading cryptos.
- Section 2(47A) has been incorporated into the Income Tax Act to provide a clear definition and classification for Virtual Digital Assets.
- Section 115BBH of the 2022 Budget levies a 30% tax on the profits of trading cryptocurrencies or other virtual digital assets from April 01, 2022.
- The 194S section also levies a 1% Tax at Source on the transfer of crypto assets from July 01, 2022, if the transactions exceed INR 10,000 (even INR 50,000 in some cases) in the same FY.
- The TDS rate applies to private investors, commercial traders, and anybody who transfers digital assets in a particular financial year.
- This tax rate applies regardless of the investor’s income and doesn’t distinguish between short-term and long-term gains.
Furthermore, from July 01, 2022, as per the newly inserted Section 194S of the IT Act, TDS at the 1% rate will be deducted by the buyer when paying the seller for the transfer of Crypto/NFT. In case the transaction is made on an Indian exchange, then the Indian exchange will deduct the TDS and pay the balance amount to the seller. In this case, no action needs to be taken by the buyer.
These tax compliances are equally applicable and affect businesses and individuals involved in crypto sales and trades. You’re charged 1% on every transaction whenever you transfer your crypto. The 1% TDS on any crypto transfer was implemented nationwide on July 1, 2022.
Latest Updates On Crypto Tax India
The Government and the Income Tax Department (ITD) have provided comprehensive guidelines regarding cryptocurrencies and the potential tax implications for investors in the last couple of years.
As of 2023, individuals investing in crypto and other virtual digital assets must disclose their income. If held as part of an investment portfolio, the gains should be declared capital gains. The assets should be reported as business income if they are fit for trading purposes. It’s important to note that individuals with business income should use ITR-3, not ITR-2, for filing.
For the financial year 2022-2023, the Income Tax Return now includes a dedicated section known as the Schedule Virtual Digital Assets. It is designed to report gains from crypto and other virtual digital assets.
Penalties for non-compliance with cryptocurrency taxation in India have been introduced, including the failure to deduct TDS (Tax Deducted at Source) and the failure to deposit TDS, as outlined in sections 271C and 276B.
Understanding The Sections
- Section 271C Deals with penalties for failure to deduct or pay Tax Deducted at Source (TDS) or Tax Collected at Source (TCS).
- Section 276B: Deals with prosecution for failure to deduct or pay TDS after deducting it.
Penalties Under Section 271C
- Penalty amount: Equal to the amount of tax not deducted or paid.
- Exception: Proving reasonable cause for non-compliance exempts from penalties.
- Recent clarification: The Supreme Court ruled that Section 271C doesn’t apply to delays in remitting deducted TDS to the government treasury.
Penalties Under Section 276B
- Punishment: Up to 7 years in prison, a fine up to 200% of the tax amount, or both.
- Applicability: Only if there is willful non-compliance (intention to evade tax).
- Threshold: Prosecution can only be initiated if the tax exceeds Rs. 50,000.
It is crucial to adhere to the deadlines set by the ITD. The Income Tax Return (ITR) for the fiscal year 2023-24 must be filed by July 31st, 2024. A belated return can be filed for those who miss the deadline until December 31st, 2024, along with interest and penalty, if any.
Crypto Tax India-Key Notes
- Individuals must disclose crypto income and report gains accordingly.
- Use ITR-3 for crypto business income and ITR-2 if receiving a salary in cryptocurrency.
- FY 2022-2023 ITR includes Schedule Virtual Digital Assets.
- Authorities introduced penalties for non-compliance, emphasising the deduction and deposit of TDS.
- The section 115BBH levies a 30% tax on your crypto transactions
- The Section 194S of the IT Act levies a 1% TDS on the transfer of VDAs
- The 30% tax rate is applicable from April 1, 2022
- The 1% TDS rate is applicable from July 1, 2022
The 30% Tax Rate On Cryptocurrency In India
The 2022 Indian Financial Budget introduced us to a pretty hefty tax rate on the cryptocurrency forefront. This 30% tax rate applies to the following:
- Trading cryptocurrencies with INR
- Exchanging cryptocurrencies for other cryptocurrencies
- Spending cryptocurrencies for goods or services.
Even though the 30% tax rate applies to trading, selling, or spending cryptos, plenty of other events are taxed differently.
Let’s examine these transactions and discover how crypto tax in India functions.
Let’s explore all these types of transactions and understand how they are taxed in India.
Chapter 1 - Understanding Crypto TDS
Tax Deductible at Source (or TDS) was introduced alongside India’s 30% crypto tax under the Financial Budget 2022.
TDS aims to charge crypto investors and traders at the source for any transactions they make. When TDS is deducted, a person (the deductor) who owes a specific amount to another person or party (deductee) must deduct the TDS amount from the total invoice value/ payment at the source and remit it to the central government.
This TDS amount on crypto in India is deducted at 1%.
From July 01, 2022, the buyer will deduct TDS at the 1% rate when paying the seller for the transfer of Crypto/NFT. If the transaction is made on an exchange, the exchange might deduct the TDS and pay the remaining balance amount to the seller.
Indian exchanges automatically deduct the TDS.
However, If a taxpayer trades on foreign exchanges, they must manually deduct TDS and file their TDS returns.
The TDS on cryptocurrency in India might be a dynamic approach as it might change over time. However, we can now understand the implications of this 1% TDS and how it affects you and your crypto trades.
New Penalties For Non-Compliance With TDS In The Crypto Space
Crypto investors in India are facing significant consequences. This follows the recent announcement by the Indian government, emphasising strict measures against traders not adhering to TDS rules.
Under the new regulations, failure to deduct and pay TDS to the government can result in penalties. This can be as grave as amounting to 100% of the TDS value.
In some instances, offenders may also be subject to imprisonment. The period designated ranges from 3 months to 7 years, along with a fine.
Let’s delve into the details of the legislation with illustrative examples.
Section 271C: Penalty For TDS Deduction Failure
If taxpayers neglect to deduct TDS, they may be penalised. This penalty is equivalent to the TDS amount due, as determined by the Joint Commissioner.
Example:
Aman bought Bitcoin worth INR 100,000. According to Section 194S, he must deduct 1% TDS before paying the seller.
If Aman fails to deduct the 1% TDS (INR 1,000) and submit it to the government. In such a case, he could face an INR 1,000 penalty imposed by the Joint Commissioner.
Section 276B: Failure To Remit TDS To The Government
Any taxpayer failing to remit TDS to the government may face imprisonment for a period ranging from 3 months to 7 years. Upon application by the ITD and with the prior approval of the Joint Commissioner, the court can impose a fine and imprisonment.
Example:
If Aman deducted the 1% TDS (INR 1,000), however, he failed to deposit it with the government. Aman could potentially be sentenced to 3 months to 7 years in jail and a fine
These new measures underscore the government’s commitment to enforcing TDS compliance in the crypto sector. It also urges investors to diligently follow the rules to avoid severe penalties and legal consequences.
Chapter 2 - Tax On Crypto Gains
Yes, crypto gains do attract crypto tax in India. If you’ve ever invested in cryptocurrency or other VDAs as a trader, your portfolio can either attract losses or profits.
Your crypto gains refer to the profit your crypto holdings gather over time.
This includes:
- Your capital gains
- Exchanging crypto assets
- Using crypto to buy goods or services
These capital gains are taxed at a flat rate of 30% plus a 4% health and education.
Example:
Aman bought Bitcoin for over INR 10,000 in Nov 2023 and sold it for INR 15,000 in Jan 2024. This results in a profit of INR 5000. This profit is treated as capital gains under Crypto/VDA assets (introduced in 2022) in India. Also, it is taxed as Capital Gains under cryptocurrency tax laws in India.
Profits made on crypto investments are among the most common methods of earning from cryptos.
Chapter 3 - Income Tax On Crypto Transactions
The ITD may consider your cryptocurrency transactions taxable income. In such cases, you must pay taxes at the individual tax rate upon receiving the income. This applies to various scenarios, including:
- Receiving crypto as a gift
- Mining crypto coins
- Receiving payment in cryptocurrency.
- Earning staking rewards.
- Receiving airdrops.
If you later decide to sell, trade or use the tokens acquired through the above scenarios, you will have to pay a CGT tax of 30% on any gains you make.
Individual Tax Rates For FY 2023-2024
Here’s the new tax slab presented in the budget for 2023 for people aged up to 60.
Tax Slab | Rates |
Up to Rs. 3,00,000 | NIL |
Rs. 300,000 to Rs. 6,00,000 | 5% on income which exceeds Rs 3,00,000 |
Rs. 6,00,000 to Rs. 900,000 | Rs 15,000 + 10% on income more than Rs 6,00,000 |
Rs. 9,00,000 to Rs. 12,00,000 | Rs 45,000 + 15% on income more than Rs 9,00,000 |
Rs. 12,00,000 to Rs. 1500,000 | Rs 90,000 + 20% on income more than Rs 12,00,000 |
Above Rs. 15,00,000 | Rs 150,000 + 30% on income more than Rs 15,00,000 |
Income Tax Slab For Citizens Aged Between 60 to 80 Years
Tax Slabs | Rates |
Rs. 2.5 lakhs | NIL |
Rs. 2.5 lakhs – Rs. 3 lakhs | NIL |
Rs. 3 lakhs – Rs. 5 lakhs | 5.00% |
Rs. 5 lakhs – Rs. 10 lakhs | 20.00% |
Rs. 10 lakhs and more | 30.00% |
Income Tax Slab For Citizens Aged Above 80 Years
Tax Slabs | Rates |
Rs. 0 – Rs. 5 lakhs | NIL |
Rs. 5 lakhs – Rs. 10 lakhs | 20.00% |
Above Rs. 10 lakhs | 30.00% |
Chapter 4- Tax On Airdrop
Airdrops are the initial tokens or coins you usually receive before a crypto project starts.
Even though Airdrops are part of a marketing strategy for crypto projects, being one of the first receivers of these tokens shall make you liable to pay taxes.
After FY 2021-22, India’s introduced cryptocurrency tax also imposed a tax on Airdrops and related transactions.
However, these Airdrops are taxed differently than your usual crypto gains. These Airdrops are taxed as Income from Other Sources (IFOS).
IFOS applies only to Airdrops if they have value – as on the date of receipt and are traded on exchanges or DEXes.
Example:
Ravi received 10,000 ABC tokens for holding 100 XYZ tokens, on April 1st, 2023, on that day the fair market value of ABC tokens was INR 10.
Ravi will be liable to pay tax at his slab rate on the ABC tokens he received, so he’ll pay Income Tax on INR 1,00,000.
If he later sells them at INR 20 each, his taxable gains would also be INR 1,00,000. With a 30% tax rate, he owes INR 30,000 in taxes.
Important: Crypto airdrops are considered gifts for tax purposes and could be eligible for tax exemption. However, you will qualify for a tax exemption if the total value of airdrops and gifts you receive in a year is within Rs 50,000.
Chapter 5 - Tax On NFT Trading
Non-fungible tokens (or NFTs) soared in popularity around 2017 with the launch of CryptoKitties. With clubs like BAYC or World of Women, NFTs quickly became a widely renowned phenomenon that everybody wanted to capitalise on.
However, this surge in popularity recently called for taxation from the Indian government in the 2022 Financial Budget.
As a result, you’re liable to pay taxes on your NFT trading.
But under what tax regime do they fall?
- Buying an NFT with fiat currency isn’t taxable.
- But buying the same NFT with a cryptocurrency like BTC or ETH is taxable.
Per the IT Act, all NFTs will be taxed at 30% (plus surcharge and cess).
Furthermore, there’s an implication of a 1% TDS that will be deducted from every sale.
To calculate your taxes for NFTs in India, you will need to determine the capital gains from the sale of the NFT. Capital gains tax is applicable if the NFT is sold for a profit before reducing expenses and royalties.
Chapter 6- Tax On Mining Cryptocurrency
Crypto mining is a decade-old method of contributing to the public crypto blockchain and reaping rewards.
Earning crypto coins and generating viable income has become popular in recent years. Therefore, the Indian Government now levies taxes, as introduced in its Financial Budget 2022, on income related to crypto mining.
Mining cryptos could be done for various purposes, including mining for business or as a hobby, but it does attract tax in India.
Mining income is classified as per the type of activity. This income can be disclosed as Income from Business or Other Sources based on the type of mining activity. Let’s say you have decided to sell, exchange, or use the rewards you’ve earned from mining and make a profit. You must know that a 30% tax will apply to that profit.
Chapter 7 - Tax On Crypto Staking
If you are one of the many crypto stakers, you already know the pain of adhering to the entire process before starting crypto staking. The struggle is real, from choosing a proper validator to selecting a particular crypto to stake.
To fuel the flame, the announcement of cryptocurrency taxation India in the 2022 Financial Budget brought more struggle to such crypto stakers.
However, proper clarification was still needed to mitigate the confusion around the taxation regimes among people.
So, Are you liable to pay taxes on crypto staking?
The short answer is yes, you must pay taxes on staking crypto.
The percentage of return a validator provides each year, the APR (Annual Percentage Rate), determines profits from staking.
Example:
Assume you stake 100 “X” coins to a validator that offers a 10% APR. Every year, you will receive 10% interest on your asset. This means your net asset will be 100+(100×10%)= 110 after one year. That implies you’ll receive 10÷365= 0.027% interest every day or 10÷12= 0.833% interest per month.
Staking Income is taxed as Other Income at applicable Income tax slab rates. When the crypto asset is sold, Capital Gains Tax will be levied. Most investors will pay Income Tax upon receipt and a Flat 30% tax on subsequent gains.
Moving your coins to a staking pool or a wallet usually doesn’t attract taxes. An asset transfer between wallets is generally tax-free. However, the gas fee involved is taxable separately.
Most times, moving your coins to a staking pool or a wallet doesn’t attract taxes. An asset transfer between wallets usually is tax-free. However, the gas fee involved is taxable separately.
Chapter 8- Tax On Minting Crypto
Minting crypto tokens is an aged method of creating new blocks, authenticating data, and recording information on the blockchain.
Minting is one of those processes that’s recorded through a “Proof of stake” protocol.
Minting is a process of creating new tokens, and there’s no income from it.
So, is crypto minting liable for crypto tax in India?
Well, not really!
You see, minting is a method of generating new tokens on the blockchain. This also means that apart from the gas fees involved, there’s no other cost incurred in minting tokens. This makes minting a non-taxable transaction according to India’s 2022 financial budget.
Hence, minting tokens does not incur cryptocurrency taxation in India.
However, per the Income-tax Act, alternative treatment to minting tokens is also possible.
Chapter 9- Tax On Crypto Gifts
Gifting cryptos and other virtual digital assets is one way of transferring your assets to somebody else.
Even though it’s practically the same as gifting somebody a portrait or some money, is it still taxable in India?
The Financial Budget of 2022 introduced cryptocurrency tax in India. However, gifting cryptocurrencies was one of those transactions where there wasn’t enough clarity.
Gifting cryptos or other virtual assets refers to transferring cryptos from one person to another as a present. The Income Tax regulations in India consider crypto gifts as:
Movable property gifts: Specified movable assets received as a gift or at a lower price (less than its market value).
Cryptos could be gifted via gift cards, crypto paper wallets, or crypto tokens.
In India, gifting cryptos could incur taxes. Gifts received with a value of up to INR 50,000 are tax-exempt. Gifts received from relatives exceeding INR 50,000 are tax-exempt, too. Gifts from non-relatives with a value exceeding INR 50,000 are taxable.
The VDA gifts received on special occasions, through inheritance or a will, marriage, or in contemplation of death are also exempt from tax.
Chapter 10- Tax On Crypto Salary
Ever thought of receiving a salary in your crypto portfolio in India? Well, it is uncommon, but it is still a thing. Moreover, it is considered a form of earning through cryptos.
Since the introduction of laws on crypto tax in India, are crypto salaries also taxable under it?
Well, here’s the answer.
Receiving a monthly salary from crypto-related activities is taxable in India. The respective wage isn’t just taxable at the crypto forefront but also puts you in the taxable salary slabs in India.
Since you are receiving the crypto salary, it gets deposited into your portfolio, which you can transfer to your bank. Whether you transfer it or use it in P2P transactions, it’s still taxable under crypto tax in India.
The following actions are taxable as well:
- Purchasing more crypto using INR or any other fiat cash.
- Buying goods and services using cryptocurrency.
- Trading stablecoins or other cryptos.
Chapter 11- Tax On Crypto Donations
Making a donation via crypto is still a form of a traditional way of donating, just with added security and convenience.
The provision of crypto donations opens doors to making cross-border and anonymous donations, which really adds the essence to the whole equation.
However, being a form of crypto transaction, are crypto donations taxed in India?
The short answer is yes. Crypto donations are taxed in India. In India, donating via crypto is considered the sale of digital assets, and any capital gains from this sale are subject to tax.
Chapter 12 - Tax On Crypto Referrals
Before you start profiting off your subsequent crypto referral, you should know that crypto referrals are also taxable in India, according to the Financial Budget 2022.
A crypto referral allows a crypto platform or service user to invite more users to the same platform. In this case, the returns usually involve referral bonuses that could be used as monetary value.
However, since this is also a form of earning from crypto and other VDAs, these referrals are also taxed in India. The crypto referral bonuses are considered additional income for tax purposes and are subject to Income Tax in India.
If the bonus is paid in crypto, the fair market value of the crypto on the day it was received must be used to calculate the amount of additional income. The crypto is later sold, traded, spent, or gifted, Now, the trader becomes liable to pay a Capital Gains Tax of 30% on any gains.
In India, referral bonuses that usually fall under the income from other sources (IFOS) category are considered additional income. They are subject to income tax based on the applicable slab rate for the individual.
Chapter 13 - Tax On Token Sales (ICOs And IDOs)
Please note – This explanation is from an investor’s point of view.
Initial Coin Offerings (ICOs) and Initial DEX Offerings (IDOs) are token sales types liable to taxes in India.
Over the years, ICOs and IDOs have been a primary reason for many successful crypto projects. Features like decentralisation, better accessibility, faster fundraising, and lower entry barriers in ICOs and IDOs allow investors to invest in new projects with smaller amounts of capital.
The offerings are a way for crypto projects to raise funds from the public by offering their tokens for sale. This also makes them subject to taxation in India, according to the Financial Budget 2022.
In ICOs and IDOs, tokens are airdropped to investors who stake a particular token for a specified period. In India, these tokens are taxed as Income From Other Sources (IFOS). IFOS is taxed upon receipt and capital gains on subsequent sales.
Tokens are not always airdropped to users. In most ICO/IDO, investors must pay in USDT/USDC or any other crypto asset and obtain the Project’s token. So, if an investor is paying in USDT to obtain the token, then Capital gains will accrue on the sale of USDT.
Chapter 14 - Tax On Futures/Derivatives Trading
Crypto futures trading involves buying or selling a specified amount of cryptocurrency at a predetermined price for future delivery. You can profit from price movements without owning the actual asset. It offers opportunities for speculation, hedging, and leveraging but carries risks due to market volatility.
Calculating crypto trading tax in India on the gains from futures trading is straightforward. Initially, there are no immediate tax obligations when you exchange your Indian Rupees (INR) for USDT stablecoin to participate in crypto futures trading. However, taxes come into play when you decide to convert your USDT back into INR.
Let’s break down the process into a practical scenario. Imagine you’ve made a profit over a specific period and wish to convert that profit, which is in USDT, back into INR. In such a situation, you’ll need to adhere to the following tax requirements:
30% Tax On Profits:
When you convert your USDT back into INR, you’ll be subject to a 30% tax on your profits and a 4% cess. It’s important to note that this tax cannot be used to offset any losses you may have experienced while trading other cryptocurrencies.
1% TDS (Tax Deducted At Source):
Additionally, a 1% Tax Deducted At Source (TDS) will be applied to the transaction value of the USDT you are converting back into INR.
Example:
For instance, you’ve earned a profit of 800 USD from your initial trading capital of 920 USD in crypto futures trading. When you convert this USDT into Indian Rupees, you must sell your USDT stablecoin on the spot market in exchange for fiat INR.
At this point, the 30% tax on profits and the 1% TDS on the transaction value will be applicable. Remember that these tax implications are specific to the gains made during the trading period. Also, they do not consider any losses from trading other cryptocurrencies.
Chapter 15 - Other Crypto Trading Tax In India
So, how are other crypto trading taxed in India? Let’s begin with crypto spot trading.
Spot Crypto Trading Tax In India
Crypto spot trading involves buying and selling digital assets for immediate delivery. Transactions occur instantly at the current market price, settling “on the spot” without the need for future delivery contracts. Now comes the question of how it is taxed.
In India, crypto spot trading is taxed uniformly at a flat rate of 30%, plus a 4% health and education cess under Section 115BBH of the Income Tax Act. This taxation applies irrespective of the holding period, eliminating distinctions between short-term and long-term gains. A 1% TDS is applicable on sale transactions exceeding Rs. 50,000 annually, starting July 1, 2022, covering the entire sale value.
Importantly, no deductions or exemptions are permitted. This is in exception for the cost of acquiring the crypto asset, preventing offsetting losses from one trade against gains from another.
Margin Crypto Trading Tax In India
Crypto margin trading allows you to borrow funds, magnifying your market exposure beyond your initial investment. Using leverage, you can amplify profits and increase the risk of substantial losses.
Crypto gains, including those from margin trading, face cryptocurrency taxation in India as income from virtual digital assets (VDAs) under Section 115BBH of the Income Tax Act, 1961. Brace yourself for a flat 30% tax rate, applicable surcharge and a 4% cess.
Now, let’s delve into the details of margin trading taxation.
Profits incurred from closing leveraged positions are subject to the 30% VDA tax. This is calculated as the sale price minus the acquisition cost, which includes borrowed funds.
Unfortunately, VDA losses can’t offset other income categories and can only be carried forward for eight years. Forced liquidations due to margin calls are taxable events, with the sale price determining the profit or loss. Also, gains from crypto derivatives fall under the 30% VDA tax slab.
Starting July 1, 2022, a 1% TDS applies to cryptocurrency transfers exceeding INR 50,000 (or INR 10,000 for specific categories) on exchanges. It’s essential to note that this TDS isn’t your final tax liability but serves as an advance payment. Stay informed and navigate the crypto tax landscape with caution.
Chapter 16 - Tax On Lost Or Stolen Cryptos
The Income Tax Department has not provided explicit guidance regarding lost or stolen cryptocurrencies. Drawing insights from past rulings by Indian courts on the loss or theft of different types of assets, it appears that no tax liability is incurred on crypto that is lost due to hacking, scams, or theft.
Despite this, claiming and offsetting a loss from a lost or stolen crypto asset against gains might be challenging. This is due to the ITD’s strict position on such offsetting.
However, investors should be aware that even though there may not be a tax obligation for the lost crypto, offsetting losses against gains might face hurdles according to the ITD’s stringent approach.
Chapter 17 - Tax On DeFi Income In India
The ITD has yet to provide specific instructions regarding decentralised finance (DeFi) transactions. To understand the tax implications, we should look at the current rules outlined in the Income Tax Act.
Here are some DeFi transactions that might be subject to taxation at your tax rate:
- Earning New Tokens: This includes tokens gained through liquidity mining, governance activities, or as rewards.
- Referral Rewards: Any rewards received through referral programs may be taxable.
- Play-To-Earn Income: Income generated from play-to-earn activities within the DeFi space could be subject to taxation.
- Browse-to-Earn Platforms: Platforms such as Permission.io or Brave, where users earn rewards for browsing, may also have tax implications.
Even if you paid taxes upon receiving the tokens, it’s important to remember that you may still be subject to a 30% CGT tax on any profits if you sell, swap, or spend them later.
Chapter 18 - Tax On Income From Consultancy Services
Income from consultancy in crypto refers to earnings generated by providing expert advice and guidance in the cryptocurrency industry. Crypto consultants offer insights on trading strategies, market analysis, blockchain technology, and regulatory compliance. They often charge fees for their services, contributing to their income in the rapidly evolving crypto space.
If earned in cryptocurrency, consulting income is considered IFOS and is subject to income tax as per the Income Tax Department (ITD). The applicable tax rate depends on the individual’s tax slab. A person can claim any necessary deductions from the same.
Additionally, GST returns must be filed if eligible. Selling tokens later incurs a Capital Gains Tax (CGT) of 30% and a 4% cess on the tax amount. Stay informed about tax obligations in the dynamic crypto landscape to ensure compliance.
Chapter 19 - Transactions That Are Free of Cryptocurrency Tax In India
Not every transaction is subject to crypto tax in India. Here’s a breakdown of when you won’t have to pay taxes on your crypto:
HODLing Crypto
Holding onto your cryptocurrency without engaging in any transactions is tax-free in India.
Transferring Crypto Between Your Wallets
Moving your crypto assets between your wallets also does not attract liabilities.
Receiving Gifts Of Crypto
You can receive crypto gifts without worrying about taxes under the following circumstances:
- Receiving a gift of crypto up to INR 50,000 from friends and relatives.
- Receiving a gift of any amount of crypto from close family members.
Hence, if you are holding onto your crypto, transferring it between your wallets, or receiving crypto gifts within the specified limits from friends and relatives, you won’t be required to pay taxes on these transactions in India.
How To Make Your Tax Filing Convenient With KoinX?
KoinX is a comprehensive taxation tool that easily integrates with your preferred exchange(s) and gives you a detailed report about your tax obligations.
Launched in 2022, KoinX is one of the most comprehensive crypto tax calculating tools built for consumers and crypto tax advisors.
With its easy-to-navigate UI, simple exchange integration, and various features, KoinX is on its way to becoming one of India’s fastest-growing crypto taxation platforms.
The feature of importing tax data gives you a slight advantage over other platforms. This is because you can easily forward this information to your tax advisor, who helps you file your taxes.
Being beginner-friendly with a ton of resources, KoinX works in a few simple steps:
Download your transaction data from your preferred exchange(s).
Upload the CSV files of these transactions to KoinX.
Get a detailed report of your transactions and your tax liabilities.
Start using KoinX for a more streamlined tax calculation.
The best part?
No technical knowledge is required.
Frequently Asked Questions
Let’s answer some of the frequently asked questions about crypto tax India:
Is GST Applicable To Crypto Transactions In India?
The Indian government’s stance on applying the Goods and Services Tax (GST) to cryptocurrency remains unclear. The existing GST Act needs to address VDAs, leading to ambiguity. Top Indian crypto exchanges actively seek clarification on whether GST should be imposed on crypto assets and who should be responsible for collecting it.
Can ITD Track Your Crypto Transactions?
The ITD utilises KYC data from domestic exchanges and a 1% Tax Deducted at Source (TDS) to monitor individuals’ crypto holdings, enhancing tax compliance efforts. This allows the ITD to request exchange data to track taxpayers’ assets accurately, streamlining the process.
When Do I Report Crypto Taxes To The Income Tax Department?
In India, the financial year runs from April 1st to March 31st. The current financial year, FY 2023-24, spans from April 1st, 2023, to March 31st, 2024. Taxpayers must file for belated returns by July 31st, 2024 (non-audit cases), October 31st, 2024 (audit cases), or December 31st, 2024.
Which Cost Basis Method Is Accepted In India?
Investors face challenges tracking gains and losses across multiple crypto assets, complicating cost-basis calculations. Choosing a cost basis method, such as first in, first out (FIFO) or average cost basis (ACB), influences the determination of assets sold and timing, impacting overall gains and losses. FIFO and average cost are commonly recognised accounting methods for calculating crypto taxes in India.
Can You Offset Your Crypto Losses In India?
Indian investors face a setback as Section 115BBH bars offsetting crypto losses against gains or other income. Additionally, claiming crypto-related expenses is restricted and limited only to the cost of acquisition. This poses challenges for those seeking to mitigate losses and expenses in the crypto market.
