For many Indians, cryptocurrencies are now a regular part of daily investing; they are not only a trend. But among profits and trade also comes a crucial issue: crypto tax laws. Let’s dissect the Indian crypto tax laws in a straightforward and understandable manner.
Are cryptocurrencies legal in India?
Indeed, in India cryptocurrencies are not illegal. You could hold, sell, and buy it. Unlike the Indian rupee, it is not legal tender though. This implies that most places you cannot use it to pay for goods and services. Crypto tax laws come into play because the government does, in fact, tax cryptocurrency income.
Taxes on cryptocurrencies in India:
The Indian government set explicit guidelines for taxing digital assets including Bitcoin, Ethereum, and NFTs from 1st April 2022.
Important Guidelines for Crypto Taxation:
- 30% tax on crypto profits (flat rate, no slab benefit)
- Every transaction shows 1% TDS, or Tax Deducted at Source.
- Not allowed are deductions except for purchase costs.
- Not one set-off or carry forward of crypto losses.
Therefore, you pay taxes if you make a profit; but, your tax will not be reduced if you lose money.
Crypto Tax: An Illustration
Assuming you paid ₹1,00,000 for Bitcoin and sold it for ₹1,50,000,
Profit: fifty thousand pounds
Tax = ₹15,000—30% of ₹50,000
Plus 1% TDS (₹1,500) at sale’s time
You cannot balance a loss from another crypto trade against this gain.
Virtual digital asset (VDA) definition
The government refers to Virtual Digital Assets (VDA) under crypto tax laws to encompass:
- Bitcoins, Ethereum, Solana—among other cryptocurrencies—
- Non-functional Tokens, or NFTs
- Any other digital asset the government alerts us of
These fall under a different category than stocks or mutual funds and are taxed specifically.
Filing ITR using cryptocurrency income
Should you trade or invest in cryptocurrencies, you must:
- Under “income from other sources” (or capital gains depending on your activity), report it.
- Pay thirty percent tax on gains.
- Clearly mark every transaction in your report.
- Bring up TDS already deducted here.
A CA or crypto tax calculator will help you stay free from errors.
Tracking and documenting cryptocurrency transactions:
- Track buy and sell dates.
- Rates and quantities as well as prices.
- Trade or wallet used.
- TDS specifics (accessible on your crypto platform).
To further simplify matters, some Indian exchanges also provide yearly tax reports.
Thought Final Notes
It’s crucial to trade wisely and remain tax-compliant in light of the strict crypto tax laws in place. Assume not that crypto is tax-free. The Income Tax Department expects accurate reporting regardless of your income—1,000 or 1,000,000. Maintaining your crypto journey free from stress, stay conscious, file your returns on time.
