Finally some clarity on cryptocurrency taxation and Bitcoin profits taxation front. Budget 2022 has announced that all virtual digital assets including cryptocurrencies like Bitcoin will be taxed 30% from 1st April 2022.
What this means is:
- All the gains (or income) from the sale of digital assets and cryptocurrencies will be taxed at 30%. Do note that only the gains (after deducting the cost of acquisition) will be taxed and not the entire sale value.
- The rate will be the same for everyone regardless of their personal income tax slabs.
- The rate will be the same regardless of the holding (or HODLing) period whether it’s short-term or long-term.
- No indexation benefit will be allowed.
- You also cannot set off any losses or gains from cryptocurrencies with those from other assets.
- You cannot carry forward the losses from cryptocurrencies to the next or future financial years.
That is not all.
Since there was a lot of noise that crypto transactions are not tracked properly, the government has decided to introduce a 1% TDS on crypto transactions as well. This is primarily to capture the transaction details. The 1% TDS will be applicable only above the transactions of a specific threshold (to be announced later).
And what if you decide to gift cryptocurrencies to someone?
Such transfers will be taxed at the same rate in the hand of the recipients. And no matter who you are, no type of recipient will be excluded from crypto taxation.
By the way, digital assets include not only the cryptocurrencies like Bitcoin vs Ethereum and other Altcoins but also non-fungible tokens (NFTs) and any other tokens of similar nature.
The proposal to tax the cryptocurrency is on expected lines. The government would never have allowed it to go untaxed. But from the face of it, it seems that the government’s stance here is that it has towards speculative income like those from lottery winnings, games show winnings (like in KBC), etc.
The tax may seem high, and it is compared to other taxes in India, it nevertheless clears the air about the government’s take on cryptocurrency as an evolving space and its taxation. Though how all this actually pans out will be interesting to see and to be honest, will only become clear in due course of time.
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So that was about Cryptocurrency taxation and Bitcoin Taxation in India (2022).
Will 1% TDS will also applicable for losses so that multiple crypto transaction are reported to govt..?
Tax will be effective from 1st April 2021 and not 1st April 2022 as has been mentioned by yourself.