Cryptocurrency is no longer limited to trading or investing. Many professionals worldwide are now receiving salaries in cryptocurrencies like Bitcoin and Ethereum. This new payment method brings speed, flexibility, and new opportunities. However, it also introduces important tax obligations you must understand if you live in India.
Receiving a crypto salary means more than just checking your wallet balance. In India, the government treats your crypto earnings like regular salary income for taxation purposes. This guide will explain how crypto salaries are taxed, how to calculate your tax correctly, and how to stay fully compliant while working in the digital economy.
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Tax On Crypto Salary in India
In India, crypto salaries are taxed at two different points, first when you receive the salary, and second when you dispose of the cryptocurrency. Each stage has a separate tax treatment under the Indian Income Tax Act.
Receiving Crypto Salary
When you receive a salary in cryptocurrency, it is treated like any other regular salary income. The Fair Market Value (FMV) of the crypto tokens on the date of receipt is calculated in Indian Rupees (INR). This INR value is then added to your total taxable income under the “Income from Salary” head.
The tax you pay depends on your applicable income tax slab rate under the new or old tax regime. It does not matter whether you hold or immediately convert the crypto tokens. Simply receiving them creates a taxable event based on their FMV. This FMV must be reported in your Income Tax Return (ITR) for that financial year.
Disposal of Crypto Salary
When you decide to sell, swap, or use the cryptocurrency received as salary, it is treated as a second taxable event. The act of disposing of the crypto triggers capital gains taxation. You must calculate the gain or loss by comparing the FMV at the time of receipt and the value at the time of sale or transfer.
Any gains made are taxed at a flat rate of 30% under Section 115BBH of the Income Tax Act. On top of the 30% capital gains tax, a 4% health and education cess is also applied on the calculated tax amount.
Additionally, the buyer or platform deducts a 1% Tax Deducted at Source (TDS) when you sell or exchange the crypto, provided the transaction crosses specific threshold limits within the financial year. The deducted TDS can later be adjusted when you file your tax return.
Read More: Ultimate Guide on Crypto Tax in India
What is “Salary” under the Income Tax Act?
As per Section 17(1), “salary” encompasses any payment received by an employee from their employer, be it in cash, kind, or as a facility. This includes:
Basic salary: Your fixed monthly pay.
Allowances: House rent allowance, transport allowance, etc.
Bonuses and commissions: Performance-based incentives.
Perquisites: Benefits like a car, club memberships, etc.
Profits instead of salary: Payments, such as bonuses or commissions, are received instead of salary.
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Read More: Taxable Crypto Events in India
Income Tax Slabs In India
Here’s the new tax slab presented in the budget for 2024 for taxpayers:
Income Tax Slab For Citizens Aged Below 60 Years
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% |
Read More: Which ITR Form To File Online?
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How To Calculate Crypto Salary Tax in India?
Calculating your crypto salary taxes involves two important steps. You must first calculate your income tax liability when you receive the salary, and then calculate any capital gains tax if you later sell the cryptocurrency. Here is a simple breakdown to help you understand the process.
Calculating Income from Crypto Salary
When you receive your salary in cryptocurrency, you need to determine the FMV of the tokens in Indian Rupees (INR) on the date of receipt. This amount is added to your taxable income under the “Salary” head and taxed according to your applicable income slab.
Here’s the simple formula:
Taxable Income = Number of Tokens Received × FMV per Token at Receipt |
After calculating your total taxable income, you must refer to the current income tax slabs to determine your final tax liability. Make sure you also include any other sources of income while filing your return.
Example:
Anita, a software engineer, receives her monthly salary of 0.1 Bitcoin. On the date of payment, the market value of 1 Bitcoin is INR 55,00,000. Therefore, the value of her received crypto salary is:
Taxable Income = 0.1 × INR 55,00,000 = INR 5,50,000 |
This INR 5,50,000 is added to her total income for the financial year. As per the new income tax regime, income up to INR 3,00,000 is exempt. For the next INR 2,50,000, she must pay 5% tax. Thus, her income tax calculation is:
Income Tax = 5% of INR 2,50,000 = INR 12,500 Health and education cess = 4% of INR 12,500 = INR 500 |
Thus, the total income tax liability on her crypto salary becomes:
Total Income Tax = INR 12,500 + INR 500 = INR 13,000 |
Calculating Capital Gains from Crypto Salary
When you dispose of the cryptocurrency that you received as a salary, you need to calculate the capital gain or loss. The capital gain is the difference between the selling price and the FMV recorded when the salary was received.
Here’s the simple formula:
Capital Gains = Sale Price – FMV at the Time of Receipt |
Any positive gain is taxed at a flat rate of 30%. You must also pay a 4% health and education cess on the calculated tax. If the transaction value crosses the prescribed limit, a 1% TDS will be deducted at the time of sale or transfer, which you can later claim while filing your taxes.
Example:
Six months later, Anita decides to sell her 0.1 Bitcoin when the market value of 1 Bitcoin rises to INR 65,00,000. Now, the selling price of her crypto is:
Selling Price = 0.1 × INR 65,00,000 = INR 6,50,000 |
Her capital gain is calculated as:
Capital Gain = Sale Price – FMV at Receipt |
Capital Gain = INR 6,50,000 – INR 5,50,000 = INR 1,00,000
The tax on her capital gain will be:
- 30% Capital Gains Tax = 30% of INR 1,00,000 = INR 30,000
- 4% Cess = 4% of INR 30,000 = INR 1,200
Thus, her total capital gains tax becomes:
Total CGT = INR 30,000 + INR 1,200 = INR 31,200 |
Additionally, when Anita sells her Bitcoin, the exchange deducts 1% TDS on the selling price:
TDS = 1% of INR 6,50,000 = INR 6,500
She can later adjust this TDS amount while filing her tax return.
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How Can KoinX Help With Crypto Salary Tax in India?
Managing crypto salary transactions manually can be difficult, especially when calculating income tax and capital gains accurately. KoinX simplifies the entire process and ensures you comply with Indian tax laws. Here is how KoinX can assist you:
Accurate Preview of Capital Gains
KoinX provides a clear preview of your capital gains based on real-time market values. It shows you exactly how much profit you have made when you sell your crypto salary tokens. This accurate preview helps you plan your sales and understand your tax obligations before making any disposal decisions.
Auto-Classification of Transactions
All your crypto transactions, including received salaries, sales, and swaps, are automatically classified by KoinX. This means you do not have to tag every transaction manually. By categorising transactions properly, it ensure that your tax reports are accurate and that you know which earnings are subject to income or capital gains tax.
Reliable Tax Reports
KoinX generates reliable and detailed tax reports based on your crypto salary transactions. These reports separately show your taxable income, capital gains, and TDS deductions. You can file your taxes confidently using these reports or easily share them with your chartered accountant for faster filing.
Portfolio Insights
KoinX offers you a full view of your crypto portfolio, including salary tokens and any gains or losses. With this information, you can track the value of your crypto assets over time and make better financial decisions about when to sell, hold, or convert your tokens.
Advanced Assistance from Experts
If you have doubts about reporting your crypto salary or capital gains, KoinX provides access to top crypto tax experts. They can help you with ITR filing, TDS compliance, and other complex tax issues related to receiving crypto as salary, ensuring you stay fully compliant.
CA Directory Access
KoinX also offers a verified directory of Chartered Accountants specialising in crypto taxation. If you need professional help reviewing your crypto salary earnings and filing your returns, you can easily find and consult a trusted CA through the KoinX platform.
Simplify your crypto salary taxation and avoid mistakes — join KoinX today and file your taxes accurately and stress-free!
Conclusion
Receiving your salary in cryptocurrency is an exciting opportunity, but it also brings clear tax responsibilities. You must report the fair market value of the tokens as income and calculate capital gains if you dispose of them later. Staying compliant with Indian tax laws is essential to avoid penalties.
Managing crypto salary taxes can feel complicated, but platforms like KoinX make it much easier. You can confidently handle your crypto taxes every year with accurate calculations and detailed reports.
Frequently Asked Questions
Can I Receive My Entire Salary In Cryptocurrency In India?
Yes, you can receive your entire salary in cryptocurrency if your employer agrees. However, the full fair market value of the crypto salary must be added to your total taxable income in Indian Rupees. You must still pay taxes based on your applicable income slab, just as you would for a salary received in cash.
Does Receiving A Crypto Salary Affect My Employer's Tax Obligations?
Employers must treat crypto salaries like regular salaries for tax reporting purposes. They are responsible for calculating the correct fair market value in Indian Rupees and reflecting it in the employee’s Form 16. Employers must also comply with salary deduction requirements like the provident fund and professional tax.
Is It Mandatory To Convert Crypto Salary To INR Immediately?
No, it is not mandatory to immediately convert your crypto salary to Indian Rupees. You can choose to hold the crypto in your wallet. However, the fair market value on the day you receive the tokens must still be reported as taxable salary income, even if you do not convert it to cash.
What Happens If The Value Of Crypto Salary Falls After Receipt?
If the value of your crypto salary falls after you receive it, your tax liability does not change. The taxable income is based on the fair market value on the date of receipt. Future price changes do not affect the income tax you owe, but will impact the calculation of your capital gains or losses when you sell.
Is Crypto Salary Treated Differently For Freelancers?
Crypto salary taxation for freelancers is similar to that of full-time employees, but with a slight difference. Freelancers report their crypto earnings as “Income from Business or Profession” instead of “Salary Income.” The fair market value on receipt day must still be calculated, and the income will be taxed based on applicable slab rates.
