Finance Minister Nirmala Sitharaman, in the 2022-23 Budget Speech, had announced a 30 per cent tax on gains from crypto-currencies from the Financial year 2022-23.
As per the founder of WazirX, with almost ten million users, India’s Crypto market amounted to $100 billion in trading volume in 2021. Hence, the new tax regime will yield $100 million additional income tax year for the government.
30% tax on ‘Digital Assets’
Indian Government categorically listed cryptocurrencies as ‘Virtual Digital Assets’ and made a provision of 30 per cent tax on the profit earned from same. So if a crypto user sells a cryptocurrency, making a profit of Rs 100, he will have to pay Rs 30 as taxes.
Crypto-currencies in possession will not be taxed until sold at a profit. Hence, the rise in crypto prices will not affect until sold and will be counted as income from the relevant year. Additionally, crypto-based prizes and gifts will also be liable for 30 per cent tax.
1% TDS on every transaction
Moreover, the government has mandated one per cent tax deducted at source (TDS) on every crypto-transaction, whether at profit or loss, to be deducted by whichever crypto-exchange is used for the trade.
So if a user sells who sells crypto worth Rs 100 at Rs 90, he will be charged 90 paise as TDS. However, the amount deducted as TDS will be refunded on filing yearly tax returns.
Other provisions
Crypto traders who earn income solely on trading crypto-assets can show their earnings as business income, but they will not be able to claim deductions on business expenses.
Also, the government will not allow crypto-users from showing crypto profits as capital gains plus surcharge.
What about Crypto Mining?
The government is contemplating over bringing cryptocurrency mining under goods and services tax (GST) while it also wants to make crypto trade on foreign crypto exchanges subject to GST.
