How and when do you have to pay taxes on cryptocurrency



Finance Minister Nirmala Sitharaman announced at Union Budget 2022 that India will levy a hefty flat rate tax of 30 percent on virtual assets including cryptocurrencies and non-fackable tokens, or NFTs. The 2022 budget also proposed provision for a 1 percent discounted tax at source levied on payments made from the transfer of virtual assets. Cryptocurrency traders and exchanges have welcomed the long-awaited policy framework for digital tokens. In the article, we will talk about the proposed cryptocurrency tax in detail, take a look

The 2022 budget introduced a new crypto tax

The 2022 budget proposed to introduce a new section of 115 BBH to levy income tax on cryptocurrency and other virtual assets. “Accordingly, for the taxation of virtual digital assets, I propose providing a tax on any income from the transfer of any virtual digital asset at 30 percent,” said the Minister of Finance while introducing the 2022 budget.

Proposed Section 115BBH seeks to provide that where a resident’s gross income includes any income from the transfer of any virtual digital asset, then the income tax payable shall be the total amount of income tax calculated on the income from the transfer of any virtual digital asset at a rate of 30 percent and the amount of income tax that It would have been carried by the resident person had the total income of the resident been reduced by the total income from the transfer of virtual digital assets,” the 2022 budget note said.

Decoding crypto tax

We’ve explained what the newly proposed crypto tax means for you

1) Income from the sale of virtual assets such as cryptocurrencies and NFTs will be taxed at a flat rate of 30 percent

2) There will be no deduction for any expenses incurred on cryptocurrency transactions, other than the cost of acquiring these assets.

3) Loss incurred from cryptocurrency or virtual assets cannot be offset against any other income (shares or mutual funds) of the taxpayer.

4) Loss due to digital assets cannot be carried over to the next year

5) In addition, any payments of proceeds to the taxpayer from the sale of digital assets will attract 1 percent of the total excise tax on transactions over Rs 50,000 per annum.

6) The giving of cryptocurrencies and NFTs will also be taxable to the recipient.

Example: If you have sold a virtual digital asset worth Rs 1 lakh and the purchase cost Rs 20,000. The net income from sale of virtual assets will be Rs 80,000. (1,00,000 – 20,000 rupees). As per the new income tax law, there will be a tax liability of Rs 24,000. It should be noted that the loss of virtual assets can be settled against the loss of virtual assets.

Now the bigger question is what will be considered virtual assets

What are virtual assets?

To clarify what a virtual asset would be, the budget note said, “Virtual digital assets, a new clause (47a) is proposed to be included in Section 2 of the Act. Pursuant to the proposed new clause, a virtual digital asset is proposed to mean any information, code, number or token (not an Indian currency or any foreign currency), created by means of cryptography or in any other way, by whatever name is called, providing a digital representation of a value to be exchanged for consideration or not, with the promise or representation that it has an inherent value, or acts as a store of value or a unit of account and includes its use in any financial transaction or investment, including but not limited to investment schemes and may be transferred, stored or traded electronically.”

“A non-fungible token and any other token of a similar nature are included in the definition.”

Shivam Thakral, Member of the Blockchain and Crypto Assets Council (BACC) and CEO of BuyUcoin, explained that virtual assets include all cryptocurrencies that can be traded in India on multiple platforms, as well as all types of NFTs, both of which he explains in simpler words. old and new, such as lands and other virtual experiences purchased on metaverse platforms.”

When will the crypto tax apply?

The newly proposed cryptocurrency tax will be implemented from the 2023-24 assessment year. This means that all of your income from cryptocurrency transactions in the 2022-23 fiscal year will be taxed at the rate of 30 percent. Investors are required to pay taxes according to the current tax rules for the 2021-22 fiscal year.

“The tax structure makes such that cryptocurrencies and tokens are treated as assets and not as currencies. However, it will boost trading volumes and lead to a higher percentage of the population becoming first-time retail investors in crypto,” said Atharva Sabnes, member of the Blockchain Asset Council. and Crypto Assets (BACC) and founder and CEO of NFT Labs, Inc.

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