How to Avoid Flat 30% Tax on Income from Cryptocurrency?

How to Avoid Flat 30% Tax on Income from Cryptocurrency?

 

The new crypto tax rule would apply from Assessment Year 2023-2024. That means that in the fiscal year 2022-23, your crypto income would be taxed at a rate of 30% plus cess and surcharges. Following the introduction of the planned 30% tax rule on income from cryptocurrencies and other virtual digital assets (VDAs) in Budget 2022, this may be the most pressing concern on the minds of crypto investors and traders.

How can you avoid paying a 30 percent flat tax?

The 30% tax rule will not apply to income earned in the current fiscal year until March 31st, 2022. In Assessment Year 2022–2023, if you sell your crypto holdings before March 31 and make a profit, this income will be taxed according to existing laws.

Crypto investors, according to Revenue Secretary Tarun Bajaj, can report their earnings under a specific heading in their ITR, and the Assessing Officer will handle the assessment for them for transactions completed before April 1.

“For transactions before April 1 you will show in some head in your ITR and the Assessing Officer will do an assessment for you,” Bajaj was recently quoted as saying by news agency PTI. “The Assessing Officer will take a call on what head crypto gains should be charged,” Bajaj further said.

“Income tax return forms from next year will have a separate column for making disclosures on gains made from cryptocurrencies and paying taxes,” Revenue Secretary Tarun Bajaj said on Wednesday. The government from April 1 will charge a 30 per cent tax plus cess and surcharges, on such transactions in the same manner as it treats winnings from horse races or other speculative transactions. In an interview with PTI, Bajaj said gains from cryptocurrencies were always taxable and what the Budget proposed is not a new tax but providing certainty over the issue.

“The provision in the Finance Bill is related to taxation of virtual digital assets. It is to bring certainty in taxation of cryptocurrencies. It does not convey anything on its legality which would come out once the Bill (on regulating such assets) is introduced in Parliament,” he said.

The government is drafting legislation to regulate cryptocurrencies, but no draft has been made available to the public. Meanwhile, in the coming fiscal year, central bank-backed digital money will begin to circulate, ushering in more affordable and efficient currency management. On income from cryptocurrency, the 30% plus relevant cesses and a 15% surcharge on income over Rs 50 lakh will have to be paid, he said, adding that the income tax return form from next year will have a distinct column to record gains from crypto.

“Next year ITR form will show a separate column for crypto. Yes, you will have to disclose,” he said.

While the amount of tax due on crypto income before March 31 will vary depending on the circumstances, it is certain that investors will not have to pay a flat 30% tax. This might be especially useful for small crypto investors who wish to book a profit while avoiding the standard 30% tax

The 1% TDS rule for cryptocurrency transfers will take effect on July 1, 2022. The tax authorities will be able to follow crypto transactions more easily as a result of this. Budget 2022 proposed introducing section 115BBH, which would tax any income derived from the transfer of any virtual digital asset at a rate of 30%, with no deductions permitted for any expenses.