As was announced in the budget session, the Government of India will apply tax on gains from Cryptocurrency and other virtual digital assets starting from April 1. Accordingly, a flat 30 percent tax will be levied on them.
Finance Minister Nirmala Sitharaman has come up with a new section 115BBH. The section provides computational methods and tax rates for income gains from Cryptocurrencies, Nonfungible tokens (NFTs), and other virtual digital assets.
Key points on Cryptocurrency Tax:
- Income from the sale of cryptocurrencies, NFTs, and all virtual digital assets will attract a 30 percent tax.
- There are no deductions for expenses on crypto transactions other than the cost involved in buying virtual digital assets.
- Only profits from Cryptocurrencies will be considered for calculating tax, not their loss. Likewise, loss cannot be carried forward to the following year.
- Proceeds from the sale of virtual digital assets will attract 1 percent TDS. Applicable for transactions above Rs.50,000 in one year.
- Recipients of virtual-digital-asset-gifts, including Cryptocurrencies and NFTs, will also be taxed per the new cryptocurrency tax.
Ealrlier, in January, addressing the World Economic Forum, Prime Minister Modi said, “A global uniform approach on cryptocurrencies is needed, and steps by one nation will not be sufficient.”
In line with that, India’s Central Bank equated Cryptocurrency trading with Ponzi schemes and called it a threat to the nation’s financial sovereignty.
However, in March 2020, after the Reserve Bank of India removed some restrictions on digital currencies, Crypto investments began unfolding rapidly and recorded a growth of 641% between July 2020 and June 2021.
Now, the new crypto tax will make Virtual Digital Assets costlier to trade by placing them in the same bracket as gambling.