Crypto and Digital asset tax in India — All you need to know

According to “The Times of India”, more than 4,000cr rupees were laundered via crypto unearthed by the enforcement directorate in less than 1 year.

According to NDTV news, the government is probing 7 cases of money laundering in which cryptocurrencies were used.

India has the second-highest owner in the crypto world. The number of users is also increasing day by day and it is estimated that by 2032 the user contribution to cryptocurrency will be $1.1 trillion.

To reduce these types of money laundering or fraud cases, our finance minister Nirmala Sitaraman announced a crypto bill. In this budget, they declared a flat tax on digital assets like cryptocurrency, NFTs, and other virtual assets.

This taxation is different from the stock market.

How many crypto owners are in India?

According to Indiatoday news, India has the second-highest number of crypto owners in the world. There are around 10–20 million Indian cryptocurrency investors with a total crypto holding of more than $5 billion.

This number shows the interest of investors in cryptocurrency.

India’s largest cryptocurrency exchange “Wazirx” or “CoinDCS” has crypto investors under 35 years of age.

It is estimated that 80% of users are male and 20% are female.

Crypto Tax For Investors in India

In the union budget 2022, the Finance minister of India clearly declared a 30% flat tax for all crypto investors on their profits.

This budget has been effective from 01 April 2022 on all types of “virtual digital assets” including Bitcoin, NFTs, and tokens. This is the highest tax as compared to other taxes in India.

For Example, It means if a trader invests 1 lacs in crypto and they sell it for 1.50 lacs then a trader needs to pay 30% flat tax (15000) on 50000 profits.

Invested Amount = 1,00,000

Deposit Amount = 1,50,000

Profit = 50,000

30% Flat Tax = 15000

1% TDS on Transaction

But it does not end here, 1%TDS on every transaction toward virtual currencies beyond 10000 in a year. Provisions relating to 1 percent TDS will come into effect from July 1, 2022, while gains will be taxed with effect from April 1.

As per the finance bill section, 115BBH is related to tax on virtual digital assets.

Additionally, crypto investors can’t set off their profits in one coin with their losses in another coin.

It means you make profits in bitcoin and loss in dogecoin then you need to pay a flat tax on your bitcoin profits. Plus 1% TDS on both transactions.

Let’s take the above example

30% flat tax = 15000

1% TDS on Every transaction (We assume only one transaction) 1% of 1.5 lacs: 1500

A few days ago, Nitin Kamanth, Founder of Zerodha said that 1% TDS deducted on every transaction is very dangerous for active crypto traders.

This means that when a trader trades a cryptocurrency 50 times, 50 percent of his capital will be blocked in a financial year.

For Crypto Miners

Also, a crypto miner can’t set off their liabilities with their profits. They will need to give 30% tax and 1 % TDS on every profit and transaction.

For example, a person who buys mining equipment, trading equipment, and eclectic bills can’t show their equipment as a liability.

Not only this, the Center also wants to bring crypto trading on foreign platforms under the purview of GST.

In simple terms,

• 1% TDS on every transaction
• 30% Income Tax on every profit
• No loss offset
• No setoff liabilitie

India’s stance on taxing cryptocurrency

As per the provisions of the Indian Budget 2022–23, 1% TDS has been made mandatory on crypto transactions which will be effective from 1st July.

Experts say TDS can reduce crypto trading volume in India.

The TDS will be effected from July 2022 and expert says that it is likely to curb speculative trade.

According to calculations by Nischal Shetty, founder of India-based cryptocurrency platform WazirX, it could fetch up to $100 million in additional income.

“Treatment of profit and loss of each market pair separately would discourage crypto participation and stunt the growth of the industry. This is very unfortunate, and we urge the government to reconsider this,” said Shetty. said.

Conclusion

After reading this article carefully we can understand that India’s finance minister Nirmala Sitharaman announced a crypto bill to prevent cases of money laundering. In this crypto bill, they declared a 30% flat tax on every profit of traders or investors that had been affected from 1 April 2022. As well as 1% TDS on each transaction will be deducted that will be affected from 1 July 20022. Also, a crypto trader can’t set off their profits in one coin to lose in another coin. Also, crypto miners can’t show their liabilities to reduce tax.

According to experts, taxation on crypto will reduce interest in cryptocurrency.