Taxation Rule of Crypto in India:- Full Guide 2023

In India, cryptocurrencies and non-fungible tokens (NFTs) are currently unregulated. While the Reserve Bank of India (RBI) attempted to ban cryptocurrencies in 2018, the Supreme Court overturned the action, leaving cryptocurrencies in regulatory limbo – neither illegal nor legally legal. NFTs do not appear to have sparked the same level of regulatory ire as cryptocurrencies, but they face the same legal uncertainty.

Yes, bitcoin is taxed in India and Prior to 2022, the Indian government has taken no formal position on the classification of crypto assets, nor on the following taxation of Bitcoin and other cryptocurrencies. 

However, the Indian government have accepted cryptocurrencies in India for the first time by designating them as Virtual Digital Assets (VDAs) and established a taxation structure for VDAs – aka crypto.

Rules of tax on cryptocurrency:

1. At the end of each financial year, income from the transfer of virtual digital assets such as crypto and NFTs will be taxed at 30%.
2. When reporting revenue from the transfer of digital assets, no deduction will be allowed save for the cost of acquisition.
3. Losses from digital assets cannot be offset against other sources of income.
4. Gifting digital assets will result in taxation in the hands of the receiver. Losses from one virtual digital currency cannot be offset against gains from another virtual digital currency. Because it was announced in Budget 2022, the 1% TDS point should also be included in this list of pointers.

How much is the tax on crypto gains or Profits?

Tax on Profits from trading, selling, or crypto capital gains tax spending crypto will be taxed at 30%, with a 1% TDS tax applied if the sale of crypto assets exceeds RS50,000 in a single financial year. If you are found to be making other income in crypto, such as staking or mining, you may be required to pay Income Tax at your individual tax rate upon receipt.

Which Act Rules the Tax on Crypto in India?

According to Section 206AB of the Income-Tax Act of 1961 rules the taxation system of Crypto in India and following are the Important Clauses of That act .

If a user has not submitted their Income Tax Return in the prior two years and the amount of TDS is 50,000 or more in each of the preceding two years, the Tax on Crypto (TDS) to be deducted for Crypto related transactions will be 5%.

TDS rules will apply if an order is submitted before July 1, 2022, but the trade is executed on or after July 1, 2022.

Rate of Tax on Crypto in India

The rate of tax on crypto in India is the same as the highest income tax bracket in India (excluding surcharge and cess). Private investors, commercial traders, and anybody else who moves crypto assets in a particular financial year are subject to the tax rate. 

Furthermore, the 30% tax rate will apply regardless of the nature of the income, so it makes no difference whether it is investment income or business income, and there is no distinction between short-term and long-term gains.

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