Cryptocurrencies are not just a buzzword anymore. Many Indians are starting to invest in Bitcoin, Ethereum, and other digital coins. However, the government has also intervened with clear crypto tax rules in response to this popularity surge. Understanding how these rules apply will help you avoid issues later on, whether you invest or trade cryptocurrency.
Describe Cryptocurrencies
Digital currency locked by cryptography is known as cryptocurrency. None of any government or bank controls it. Among the common names are:
- BTC, or Bitcoin
- Ethereum (ETH)
- Dogecoin (DONGE)
- Polygon (MATIC)
- And many others.
Either by holding it or trading it consistently, people purchase cryptocurrencies in search of profit. Crypto tax rules apply in this situation.
Legality of Cryptocurrencies in India
Though they are not official currency, cryptocurrencies are not forbidden in India. While the government lets individuals invest, it also clearly lays out tax laws to bring control and openness. You can, therefore, buy and sell cryptocurrencies, but you must abide by the crypto tax rules.
How Are Cryptos Taxed?
Income from cryptocurrencies is handled differently in India than regular salary income. The government taxes cryptocurrencies as follows:
30% Flat Tax on Profits
From April 1, 2022, regardless of income tax slab or earnings, any profit made from selling cryptocurrency is taxed at a flat 30%. Deductions are not allowed (except for purchase costs).
This applies even if you hold for a long period.
1% TDS on Transactions 🔸
Every crypto transaction over ₹10,000 (₹50,000 for some cases including salary earners or family transactions) pays a 1% TDS (Tax Deducted at Source). The platform thus deducts 1% each time you sell and reports it to the government.
For instance, suppose you sold Bitcoin for ₹1,50,000 after buying it for ₹1,00,000.
Profit: ₹50,000
Tax: 30% of ₹50,000 = ₹15,000
1% TDS: ₹1,500 also deducted during sale.
You have to document this on your Income Tax Return (ITR).
What Qualifies as Crypto Income?
According to current crypto tax rules, the following are taxed:
- Selling cryptocurrencies for Indian Rupees (INR)
- One crypto for another trading
- Getting paid in cryptocurrencies
- Giving cryptocurrency (the receiver might have to pay taxes)
If you are mining cryptocurrencies, the income from that activity is also taxable.
Can One Save Taxes on Cryptocurrencies?
Sadly, there are no exemptions or deductions under the current crypto tax rules, such as Section 80C or LTCG advantages. Furthermore, you are not able to offset crypto losses with other income.
However, you can:
- Carefully track all transactions.
- Use trustworthy exchanges producing tax reports.
- File your taxes truthfully to avoid fines.
Noting in Income Tax Return (ITR)
Depending on how it is categorized, crypto income has to be reported in your ITR under the head “Income from Other Sources” or “Capital Gains.” Skipping reporting may result in:
- Tax correspondence
- Interest and penalties
- Legal action in more grave circumstances
Final Thoughts
In order to invest safely and legally in the exciting new field of crypto, you must keep up with the crypto tax rules. The government has made its position very evident with a 30% tax and 1% TDS in place. Don’t let tax uncertainty stop you; simply make wise plans, keep track of everything, and correctly file your taxes.
