India’s Crypto Tax Law: What You Need to Know
India’s cryptocurrency landscape has undergone significant changes since the government introduced a formal tax framework for digital assets in the 2022 Union Budget. With over 100 million crypto users in the country, these regulations aim to bring clarity and accountability to a rapidly growing sector. This guide breaks down India’s crypto tax laws, compliance requirements, and their impact on investors and traders.
Key Provisions of India’s Crypto Tax Law
Here are the core components of India’s cryptocurrency taxation policy:
- 30% Tax on Crypto Gains: All income from virtual digital assets (VDAs), including cryptocurrencies and NFTs, is taxed at 30% without deductions for expenses (except acquisition costs).
- 1% TDS on Transactions: A 1% tax deducted at source applies to crypto transactions exceeding ₹50,000 per day or ₹10 lakh annually.
- No Loss Offset: Losses from crypto investments cannot be offset against other income sources.
- Gift Tax: Receiving crypto as a gift incurs taxation based on fair market value.
How Crypto Taxes Are Calculated in India
Calculating crypto taxes involves:
- Determining holding period (short-term vs. long-term)
- Calculating profit using FIFO (First-In-First-Out) method
- Applying the 30% flat tax rate on net gains
- Reporting all transactions in Schedule VDA of ITR-2
Impact on India’s Crypto Market
The tax regime has led to:
- 70% drop in trading volumes on domestic exchanges (2022-2023)
- Increased migration to decentralized exchanges
- Growing demand for tax compliance software
- Ongoing debates about rate reductions
FAQs About India’s Crypto Tax Law
Q: Are NFTs covered under crypto tax laws?
A: Yes, NFTs are classified as virtual digital assets and subject to the same 30% tax.
Q: How are crypto losses handled?
A: Losses can only be carried forward for offset against future crypto gains for up to 8 assessment years.
Q: Is TDS applicable to P2P transactions?
A: Yes, the 1% TDS applies regardless of exchange type if transaction thresholds are met.
Q: What are the penalties for non-compliance?
A: Failure to pay taxes may result in 100-200% penalties on due amount under Section 271C of Income Tax Act.
Preparing for Crypto Tax Compliance
Investors should:
- Maintain detailed transaction records
- Use certified tax calculation tools
- File returns before July 31 deadline
- Consult tax professionals for complex cases
While the crypto tax framework presents challenges, it represents India’s first step toward formal recognition of digital assets. Market participants should prioritize compliance while advocating for balanced regulations that support innovation.
