Introduction to Cryptocurrency Taxation in India
Cryptocurrency has surged in popularity in India, with millions investing in Bitcoin, Ethereum, and other digital assets. However, the lack of regulatory clarity left many confused about tax obligations—until 2022. The Indian government introduced specific tax rules for cryptocurrencies in the Union Budget 2022, classifying them as Virtual Digital Assets (VDAs). This guide breaks down the tax slab for cryptocurrency in India, compliance requirements, and answers to common questions.
Tax Slab for Cryptocurrency in India: Key Rules
India’s crypto tax framework focuses on two primary provisions:
- 30% Tax on Income from Cryptocurrency: Profits from selling, trading, or exchanging VDAs are taxed at 30%, plus applicable surcharges and cess. No deductions (except acquisition costs) are allowed.
- 1% TDS on Crypto Transactions: A 1% Tax Deducted at Source (TDS) applies to transactions exceeding ₹50,000 (or ₹10,000 for specific users) per year.
What Does the 30% Crypto Tax Include?
The flat 30% tax slab applies to:
- Capital gains from selling crypto.
- Income from mining or staking.
- Gifts of cryptocurrency exceeding ₹50,000 in value.
Note: Losses from crypto cannot offset gains from other income sources (e.g., stocks or salary).
1% TDS on Crypto: How It Works
The 1% TDS rule, effective July 1, 2022, impacts both traders and platforms:
- Exchanges must deduct 1% TDS on transactions above ₹50,000/year for individual/HUFs or ₹10,000/year for non-KYC users.
- TDS applies to trades, purchases, and crypto-to-crypto swaps.
- Taxpayers can claim TDS credits when filing IT returns.
Reporting Crypto Income in ITR
Disclose crypto earnings under ‘Income from Other Sources’ or ‘Capital Gains’ in your Income Tax Return (ITR). Maintain records of:
- Purchase/sale dates and prices.
- Wallet addresses and exchange statements.
- TDS certificates from platforms.
FAQs on Crypto Tax in India
Q1. Is cryptocurrency legal in India?
A: While not banned, crypto is unregulated. The RBI has cautioned users about risks, but trading remains legal with tax compliance.
Q2. Can I carry forward crypto losses?
A: No. Losses from VDAs cannot be offset against other income or carried forward to future years.
Q3. How is crypto taxed if held long-term?
A: India has no distinction between short-term and long-term gains for crypto—all are taxed at 30%.
Q4. Are NFTs taxed under the same slab?
A: Yes. NFTs qualify as VDAs and follow the 30% tax and 1% TDS rules.
Conclusion
India’s 30% tax slab for cryptocurrency reflects the government’s cautious approach to digital assets. While the high rate has drawn criticism, compliance is essential to avoid penalties. Stay updated on regulatory changes and consult a tax professional for personalized advice. As the crypto ecosystem evolves, clearer guidelines may emerge to balance innovation and revenue protection.
