Cryptocurrency and Tax Regulations by GOI – A Brief


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India has made significant progress in changing financial access through digital channels. This change is evident in the increase in digital currency users in our country. The trading volume has prominently seen a great rise in the pandemic period.

Cryptocurrency and Tax Regulations by GOI – A Brief

However, there has been a large concern over its decentralization nature, as there was no intermediate authority to monitor or control the transactions. The government of India has proposed to regulate the influx of digital currencies by introducing a crypto tax of 30%.

However, there has been a rise in crypto mining to provide authenticity to crypto-related transactions and boost the value of VDA wallets. Before understanding the tax policies on crypto, let us know what mining is in cryptocurrency.

Mining is the process of creating Bitcoin and other cryptocurrencies and verifying transactions involving the new currency. It comprises large, decentralized networks of computers worldwide that secure and verifies blockchains and digital ledgers that record cryptocurrency transactions.

The union budget of 2022 has included VDA (virtual digital assets) under the scope of assets. However, the taxation policies levied for cryptocurrencies are not similar to other assets. For example, an individual must pay a 30 percent tax on any transaction with cryptocurrencies or other NFTs (Non-fungible tokens).

When to pay crypto tax?

According to the budget, taxpayers are liable to pay crypto tax for the financial year 2022-23. The income earned by any form of transaction or exchange through cryptocurrencies will be taxed at 30 percent.

Will Tax be charged on both profit and loss?

Only the profits incurred through the crypto exchanges, sales, or transactions will be taxed, not the losses stated in the 2022 budget. For instance, if you invest 1000 rupees in crypto and earn 1500, 30 percent tax will be charged on the profit of 500, not 1000.

However, if you incur loss from one source of VDA and profit from another, you will still be charged a 30 percent tax on the profitable amount.

Does any tax levied on crypto gifts transactions?

According to the tax guidelines in budget 2022, gifting of crypto assets will also be taxed at the recipient’s end. The budget also proposes to include virtual digital assets under the moveable assets category. According to that, gifts exceeding the value of 50,000 will be taxed.

However, the crypto transactions done through specified relatives will benefit from exemption from any tax. However, the experts need more clarification on how the tax value on transactions exceeding 50,000 by non-relatives.

Any tax levied for holding cryptocurrencies?

The experts say no tax will be levied on holding cryptocurrencies or other virtual digital assets. Instead, the tax amount is chargeable only on the income earned through transactions on such VDAs.

1 percent TDS on the crypto transaction

The government of India recently updated the virtual digital assets taxation policy, which says one percent will be taxed at the source of every VDA transaction. This mechanism means that the buyer will have to pay the amount to the seller on every trade transaction done. The experts believe that the new tax mechanism will prevent money laundering and fraud on a greater scale.


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