Gains From Crypto Assets Will Be Taxed At 30% From April 1 | Details Investors Must Know

In Union Budget 2022-23, Finance Minister Nirmala Sitharaman proposed 30% tax on proceeds of digital assets. 1% TDS on virtual currency contributions exceeding Rs 10,000/ year was also recommended.

The provisions related to 1 per cent TDS, however, will come into effect from July 1, 2022, while the gains will be taxed effective April 1. Image: Getty

New Delhi: Gains from cryptocurrencies will be taxed at 30 per cent starting tomorrow (April 1), the beginning of a new financial year.

Finance Minister Nirmala Sitharaman in her Union Budget speech on February 1 proposed 30 per cent tax on proceeds of digital assets. A 1 per cent tax deducted at source (TDS) on virtual currency contributions exceeding Rs 10,000 per year was also recommended.

According to analysts, this will lead to a huge tax collection as the turnover of the top 10 crypto exchanges in India is around Rs 1 lakh crore.

The 30 per cent tax bracket is the highest tax bracket and the rate is the same as earnings from a lottery.

As the government has said, this would apply to all virtual digital assets (VDA) and their earnings, from Bitcoin to non-fungible tokens (NFTs).

For instance, if an investor buys a cryptocurrency for Rs 10,000 and sells it for Rs 15,000, making a profit of Rs 5,000, they he or she should pay a 30 per cent tax of Rs 1,500.

How will crypto users pay tax?

According to revenue secretary Tarun Bajaj, gains from cryptocurrencies were always taxable and what the Union Budget proposed is not a new tax but providing certainty over the issue. “Next year ITR form will show a separate column for crypto. Yes, you will have to disclose,” he said in an interview in February, as quoted by PTI.

This means, the users from the upcoming fiscal year will have to disclose their proceeds from digital currencies as it now come under the purview of income tax.

The 30 per cent plus applicable cesses and surcharge of 15 per cent on income above Rs 50 lakh will have to be paid on income from cryptocurrencies plus the income tax return form from next year will have a separate column to declare gains from crypto.

The provisions related to 1 per cent TDS, however, will come into effect from July 1, 2022, while the gains will be taxed effective April 1.

Certain benefits for crypto users

Crypto investors will need to be aware of a few regulations in order to stay on the right side of the law in the FY22-23.

The government has decided that if an investor is in overall loss with no earnings, then that individual will not pay tax after accounting for all cryptocurrency transactions that have been done for the year.

Investors won’t be taxed if they have bought a crypto asset that has considerably increased in value but are yet to sell it. Until they sell it and make a profit, their gains will not be taxed.