The Indian government inched closer to adopting cryptocurrencies after years of wobbling on its stance as it looks to keep up with the global shift toward digital assets. But this comes at a cost!
Cryptocurrency trading goes on the tax radar after Finance Minister Nirmala Sitharaman declared that cryptocurrency assets will be taxed from 1st April 2022. The decision has grabbed the eyeballs of especially those who were basking under the tax-free un. The Minister said that income from the transfer of any virtual digital asset shall be taxed at the rate of 30%, effectively removing uncertainties about the legal status of such transactions.
What to watch out for:
The gain on the sale of cryptocurrency would be taxed at a 30% tax rate, which would impact the post-tax return of course. The cost of mining or any other cost cannot be shown as expense to reduce the profit.
TDS @1% has been proposed for transactions involving cryptocurrency. Crypto received as a gift would also be taxable.
Crypto trading platforms such as WazirX, CoinDCX, Zebpay, etc. will now be constantly under the nose of the IT Department. Transactions will be recorded and the compliance will turn rigid. Many exchanges are likely to shut shop. It is like that some investors may not want to trade on Indian cryptocurrency platforms anymore to stay away from the high income tax burden. A global framework for digital assets trading is likely to materialize with countries like US and EU which are already working to regulate private cryptocurrency trading.
The Finance Minister while presenting the Union Budget 2022 also added that the Reserve Bank of India will launch its digital currency starting April 1, 2022.
Too long? Here’s a one-liner: Explained: Crypto tax implemented from April 1, gain on sale to be taxed at a 30% while TDS to be taxed @1%; crypto gifts also to be taxed