Tax on Crypto in India

June 11, 2024

Registrationwala

With investors around the world, the cryptocurrencies continue to gain traction. In India, there are approx. 115 million crypto investors which represent 15% of the Indian population. These individuals are mainly aged between 18 and 60, according to Forbes.

In this article, we will discuss crypto tax India.

Is Cryptocurrency taxed in India?

Yes, virtual digital assets, or crypto assets, are taxed in India since 2022. After the announcement of significant changes to the virtual asset class by the Hon. Finance Minister, Mrs. Nirmala Sitharaman, in the Union Budget 2022, virtual digital assets, also known as crypto assets, are subject to taxation in the country.

The government has formally termed digital assets, including cryptocurrency holdings, as "Virtual Digital Assets". These include all cryptocurrencies, including Ethereum, Bitcoin, Shiba Inu and others, as well as other digital assets like Non-Fungible Tokens (NFTs).

How much Crypto Tax In India do you have to pay?

When you sell crypto assets for more than Rs. 50,000 (or Rs. 10,000 in certain cases) in a single financial year, you'll have to pay a 1% TDS tax in addition to 30% tax on the gains you've made from trading, selling or spending cryptocurrency. If it is determined that you are receiving additional cryptocurrency income—for instance, through mining, airdrops, or staking—you may also be required to pay income tax at your individual slab rate upon receipt.

Individual Income Tax Slab Rates for Cryptocurrency

The Individual Income Tax Slab Rates for FY 2023-24 (AY 2024-25) for cryptocurrency are:

Existing Tax Regime Income Slab	Existing Tax Regime Tax Rate	New Tax Regime Income Slab	New Tax Regime Tax Rate
Up to Rs. 250,000	0%	Up to Rs. 300,000	0%
Rs. 250,001 - Rs. 500,000	5% above Rs. 250,000	Rs. 300,001 - Rs. 600,000	5% above Rs. 300,000
Rs. 500,001 - Rs. 1,000,000	Rs. 12,500 + 20% above Rs. 500,000	Rs. 600,001 - Rs. 900,000	Rs. 15,000 + 10% above Rs. 600,000
Above Rs. 1,000,000	Rs. 112,500 + 30% above Rs. 1,000,000	Rs. 900,001 - Rs. 1,200,000	Rs. 45,000 + 15% above Rs. 900,000
-	-	Rs. 1,200,001 - Rs. 1,500,000	Rs. 90,000 + 20% above Rs. 1,000,000
-	-	Above Rs. 1,500,000	Rs. 150,000 + 30% above Rs. 1,500,000

Note: The individual tax rates represented in the table above are applicable to individual employees aged less than 60 years. These tax rates are subject to change, so it is recommended to check the official portal of the Income Tax Department for reference.

Key Concerns Regarding Cryptocurrency Tax

The complexities of cryptocurrencies and NFTs don't seem to be taken into consideration by the new taxation regime of GOI. Experts in India and elsewhere had expressed concerns about the proper classification of cryptocurrencies and NFTs as capital assets, cash, securities, etc. prior to the amendment of the Income Tax Act.

For creating a tax system which is efficient, a detailed analysis of each VDA's type is needed. The Income Tax Act now handles cryptocurrencies, NFTs, and other VDAs uniformly.

The usage of DLT and blockchain technology by cryptocurrencies and NFTs is where the similarities between them end. NFTs are not fungible by nature, whereas cryptocurrencies are. The uses for cryptocurrencies are restricted. But when we discuss NFTs, they can be used as artwork, musical instruments, ownership certificates, and more. There may be confusion because the Income Tax Act doesn't cover the features of VDAs or how to obtain and use them.

Crypto Transactions on which Tax is Payable In India

You are required to pay a 30% tax if you engage in the following crypto transactions:

Spending cryptocurrencies to buy any goods/services.
Exchanging cryptocurrencies for other cryptocurrencies such as Bitcoin for Shiba Inu
Trading in cryptocurrency by making use of fiat currency such as INR
Receiving cryptocurrency as a payment mode for a service/gift
Mining of cryptocurrency
Being on a cryptocurrency payroll
Staking crypto and acquiring the stake benefits
Receiving crypto airdrops

Crypto Tax Latest Update 2024 by ITD

The Income Tax Department (ITD) has issued guidance regarding the crypto and the potential tax implications of your investment in the last couple of years. As of 2024, those individuals who are making an investment in crypto and other VDAs are required to disclose their income.

For FY 2023-2024, a dedicated section for reporting crypto and VDA gains has been included in the Income Tax Return. You must file ITR for FY 2023-2024 by July 31st, 2024. If you’re unable to do it, you can file a belated return by December 31, 2024.

What should Crypto Investors do?

It is clear that Indian law regarding crypto and other VDAs is still in the developing stage. Even though the new tax regime has been announced by the government, it is most likely to have some amendments in the future. Residents who want to trade or invest in VDAs at this time should become familiar with the new tax laws and, if possible, speak with a tax professional before beginning any such activities.

If people want to trade VDAs, it would be better if they did this on exchanges or marketplaces as opposed to doing business off-market. This could support the VDA's fair market value in the absence of government guidance. Additionally, taxpayers must make themselves fully aware about the fact that their losses cannot be offset by gains from another source. Also, the profits gained on VDAs can't be utilized for offsetting capital expenses such as the price of minting NFTs.

In order to ascertain whether the relevant NFTs are regarded as VDAs for the purposes of the Income Tax Act, those looking to purchase or deal in NFTs will also need to exercise caution and monitor the Government's actions.

Conclusion

It is essential to understand the rules and laws related to cryptocurrency taxation in India. All the taxpayers must adhere to TDS requirements and file ITR on time. It is essential to stay updated about changes to tax rules. Transparency, legitimacy, and peace of mind are guaranteed when engaging in cryptocurrency transactions in India by following these recommendations. If you need assistance in filing ITR, get in touch with us.

Frequently Asked Questions (FAQs)

Q1. Can my crypto transactions be tracked by the Income Tax Department?

A. Yes, your crypto transactions can be tracked by the Income Tax Department. It utilizes KYC data from domestic exchanges and a 1% TDS to monitor the crypto holdings of individuals to enhance tax compliance efforts.

Q2. Can my crypto losses be offset in India?

A. Indian crypto investors face a setback since offsetting crypto losses against gains or other income is barred by the Section 15BBH. Moreover, the only expense that can be claimed for expenses related to crypto is the cost of acquisition. This poses challenges for investors who are looking to reduce their losses and costs in the crypto market.

Q3. What are the consequences if I fail to pay the crypto tax?

A. Ignoring cryptocurrency taxes will come with consequences that go beyond fines and might land individuals in jail for up to seven years. Therefore, one must ensure timely payment of crypto tax.