How Much You May Have to Pay as Crypto Tax in India

 How Much You May Have to Pay as Crypto Tax in India

In the Union Budget 2022, the government proposed a new tax structure for taxpayers. Cryptocurrency investors must now pay a 30% tax on their gains. India has about 15-20 million cryptocurrencies, with total crypto holdings of more than $5 billion, indicating a high level of interest among investors. According to estimates, digital assets are expected to contribute $1.1 trillion by 2032.

In this year's union budget, Finance Minister Nirmala Sitharaman proposed classifying cryptocurrencies, non-fungible tokens, and any other such assets as "virtual digital assets" that are now subject to capital gains tax, comparable to stocks in the equity market.

Profits from cryptocurrency investments will be subject to a 30% tax. For example, if you invest Rs 100,000 in cryptocurrency and sell it for Rs 1,25,000, you will have made a profit of Rs 25,000. You would now be required to pay tax on the Rs 25,000 profit. Not on the Rs. 1,25,000 total sale proceeds.

This 30% profit tax additionally accounts for a 1% Tax Deducted at Source (TDS) deposited by the facilitator, exchange, or the person responsible for paying the consideration on each crypto transaction. Please keep in mind that the recipient of crypto gifts will be subject to a 30% tax.

Across the board, investors are perplexed and continue to seek information from a variety of sources. However, it is hoped that you will be able to obtain the majority of the answers to some frequently asked questions about crypto taxes.

In India, do I have to pay tax on cryptocurrency?

You cannot avoid taxation because the Reserve Bank of India (RBI) has not yet legalised cryptocurrencies. An investor who makes money by selling bitcoin must pay income tax. All income is taxed unless it is specifically exempted by the Income Tax Act.

In India, how do I file a cryptocurrency tax?

If you've invested in cryptocurrencies with the intention of seeing a long-term increase in value with a limited number of trades, you can file your crypto gain tax under the capital gains section. If your sale price is higher than the purchase price, it will be considered as a capital gain.

Should I declare my cryptocurrency on my taxes?

If you earn cryptocurrency by mining it, it's deemed taxable income and may be reported on Form 1099-NEC as self-employment income at the fair market value of the cryptocurrency on the day you got it. Even if you do not receive a 1099 form, you must declare this taxable income.

What is the procedure for filing taxes with cryptocurrency?

If you buy, trade, or exchange cryptocurrency, you'll almost certainly be subject to cryptocurrency taxes. To reconcile your capital gains and losses, you'll need to use Form 1040 Schedule D as your crypto tax form, as well as Form 8949 if appropriate.

How much tax do I have to pay on cryptocurrency?

If you hold crypto for more than a year and then sell or trade it, you will be subject to a long-term capital gains tax. Long-term capital gains tax rates differ from short-term capital gains tax rates and can range from 0% to 20% based on your overall income.

It should be noted that the Income Tax Act of 1961 does not currently contain any explicit tax regulations regarding the taxation of cryptocurrencies. If you have invested in cryptocurrencies, please ensure to report the gains in your tax return, as failing to do so might result in penalty.

You can record your gains under the categories of business income or capital gains on your income tax returns at any time. The classification of these transactions is likely to be determined by the investors' goals and the nature of the transactions.

Because you'll be paying taxes in fiat currency, all crypto investors should keep track of their gains and losses in every virtual digital asset before April 2022.