Since the legal status of cryptocurrencies was on the grey side for so long, but finally, the Indian government came up with a solution to regulate cryptocurrencies and NFTs.
India taxes crypto
In the union budget 2022-2023, the Indian government covers cryptocurrency and NFTs under the “Virtual Digital Assets” umbrella. The government solved the tax-related issue regarding current prevailing digital assets, i.e. cryptocurrencies and NFT, and future assets that can become part of such umbrella in the emerging scenario of Metaverse by categorizing them as “Virtual Digital Assets”.
The Indian government took advantage of more than 10 crores investors in the crypto-market who are earning relentlessly. The government came up with the idea of charging 30% on income arising due to the transfer of any virtual digital assets.
Heads of Income: Crypto tax
- If digital assets are sold and purchased more frequently than usual, income is to be charged under the head of PGBP
- If digital assets are held as an investment, it is to be charged under the head of Capital Gains. If investors hold the cryptocurrencies for more than 36 months, then income is to be taxed as long-term capital gains, and if they hold for less than 36 months, it would be short-term capital gains.
However, the tax rate would be the same for every person, i.e., 30%. There are some regulations regarding the eligibility of charge; these are as follows:-
- The digital asset transferred by way of gift is to be charged in the hands of the recipient at the rate of 30%
- Buyer of crypto has to withhold 1% TDS before paying
- Exchanges may undertake TDS compliance.
- Most importantly, the losses that occurred cannot be set off against any other head of income. Although, it can be set off against the income from virtual digital assets in the same financial year.
Crypto Tax: No deductions are allowed
There are no deductions of expenses relating to the earning of that income that is allowable. The only “cost of acquisition” is allowed in computing taxable income from the transfer of virtual digital assets.
The Indian government made it clear by coming up with the legal status of cryptocurrencies and NFTs that they do not want to stay backwards from other countries in terms of technology but are also unwilling to encourage it.Share & like