Is crypto taxed in India? Yes, virtual digital assets, or crypto assets, are taxed in India after the Union Budget 2022. For the first time, the government officially termed digital assets, including crypto assets, under “Virtual Digital Assets.” And now, the Indian Tax Portal, known as the Account Information System (AIS), has undergone a significant upgrade that brings forth a new capability to track and monitor digital currency transactions.
Everything you need to know about crypto tax in India
Along with cryptocurrencies such as Bitcoin and Ethereum, NFTs have been included in India’s definition of ‘Virtual Digital Asset.’ What are Virtual Digital Assets: A Virtual Digital Asset is any code or token that is generated through cryptographic means and functions as a store of value.
Each VDA should be viewed as a separate asset class. Therefore, a loss on the sale of one VDA cannot be used to offset gains on the sale of another VDA. According to the 115BBH section of the Finance Bill, a crypto-taxable event is defined as:
1. Conversion of any digital assets to INR or any other fiat currency.
2. Conversion of one virtual digital asset type to another may include crypto-to-crypto trading or trading in stablecoins.
3. Paying for goods and services using a virtual digital asset.
It is specially intended to tax cryptocurrencies and, at first glance, excludes digital gold, central bank digital currency (CBDC), and any other traditional digital assets.
Gains from the transfer of VDA are subject to a 30% tax rate, which must be increased by the Health and Education Cess and surcharge, if applicable. In addition, because the tax rate is a special rate of tax, the fundamental exemption limit shall not apply to it. Here is a summary:
1. At the end of each fiscal year, income from the transfer of virtual digital assets such as crypto and NFTs will be taxed at 30%.
2. When reporting revenue from the transfer of digital assets, no deduction will be allowed save for the cost of acquisition.
3. Losses from digital assets cannot be offset against other sources of income.
4. Gifting digital assets will result in taxation in the hands of the receiver.
5. Losses from one virtual digital currency cannot be offset against gains from another virtual digital currency. Because it was announced in Budget 2022, the 1% TDS point should also be included in this list of pointers.
In accordance with the revised Income Tax Regulations, the 1% TDS applies to all sales of crypto assets. This was implemented on July 1, 2022. Please note, however, that the TDS will be deducted from the total amount of the transaction, not just the profits. It makes no difference to TDS whether you earn a profit or incur a loss on your trade. It will be deducted regardless.
Now here is the thing: Crypto taxation in India has made it to the AIS. What does that mean for crypto investors in the country – Read on.
India’s AIS – What is it, and why is it important to India’s crypto investors?
In addition to increasing self-assessment opportunities, India has streamlined tax compliance through digitization and simpler information access. The new Annual Information Statement (AIS) is one of these measures, though it will be used in conjunction with Form 26A until the tax department indicates otherwise.
The consolidated statement, which is available on the tax compliance portal and can be accessed with the taxpayer’s PAN number, will include additional categories of information.
AIS is the extension of Form 26AS. Form 26AS provides information regarding property acquisitions, high-value investments, and TDS/TCS transactions that occurred during the fiscal year. AIS also includes interest on savings accounts, dividends, rent received, purchase and sale transactions of securities and immovable properties, foreign remittances, interest on deposits, GST turnover, etc. Now the taxation system has also added crypto tax to that list.
This is the first time Indian Income Tax seems to show digital transactions and trading-related transactions in AIS. This means there is no way crypto traders can escape from paying taxes as per their income tax slab.
Through this measure, the Indian government has ensured that there is no loophole for crypto investors to pass up paying their taxes according to the recent regimes. The move by the nation is one many countries leaning on taxing crypto are looking up to learning from. This financial year will see crypto taxes filed in their entirety.
