Crypto Tax in India - Key Points to Remember

 

Cryptocurrencies have gained significant popularity and traction worldwide in recent years, including in India. 

In India, the government introduced Section 115BBH in the 2022 budget, which imposes a 30% tax (plus surcharge and cess) on profits made from crypto trading. Additionally, a 1% Tax Deductible at Source (TDS) on crypto transactions was implemented. In this blog, we will delve into crypto tax in India and explore their implications for investors and traders.

 

Crypto Tax in India: Key Points to Remember

 

1. Tax Rate and Applicability: Section 115BBH imposes a flat 30% tax on profits made from crypto trading, starting from April 1, 2022. The tax is applicable to private investors, commercial traders, and anyone transferring crypto assets in a fiscal year, subject to certain conditions.

 

2. Nature of Income: Regardless of the nature of income (investment or business), the 30% tax rate remains the same. There is no distinction between short-term and long-term gains.

 

3. Expense Deductions: No expense deductions are allowed for crypto trading. Only the acquisition cost, which is the purchase price, can be deducted.

 

4. Loss Set-off: Crypto losses cannot be subtracted from crypto gains. Loss from any other source of income, such as business income, salary income, or house property income, cannot be set off against crypto income.

 

5. Carry Forward of Losses: There is no provision to carry forward crypto losses to future years to set off against crypto income.

 

Implications for Crypto Investors and Traders

1. Tax Calculation: The tax liability on crypto income is determined at the time of transfer or sale of the crypto asset. Unrealized gains from holding crypto assets are not taxable.

 

2. Limited Deductions: Unlike in stock and derivative trading, the government does not allow deductions for expenses like platform fees, broker fees, or internet charges. This reduces the flexibility for investors to offset their taxable gains.

 

3. Increased Compliance: The introduction of TDS on crypto transactions increases compliance requirements for both buyers and exchanges. Crypto exchanges are responsible for deducting 1% TDS on behalf of buyers and depositing it with the government.