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Raju Kumar
Asked: 2024-03-22T20:33:21+05:30 In: ,

Are cryptocurrency profits taxable?

Are cryptocurrency profits taxable?
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    1. Cryptocurrency

      Yes, cryptocurrency profits are taxable in India. The taxation rules, introduced in the 2022 budget, clearly outline how cryptocurrencies and other virtual digital assets (VDAs) are taxed. Here’s a summary of the key points:

      1. Flat 30% Tax on Profits

      • A flat 30% tax is applied to all gains from cryptocurrencies, irrespective of the holding period or income bracket.
      • No distinction is made between short-term and long-term gains.
      • No deductions are allowed except for the cost of acquisition.

      2. 1% TDS on Transactions

      • A 1% Tax Deducted at Source (TDS) applies to transactions exceeding ₹10,000 (or ₹50,000 for specified cases) per financial year.
      • TDS is deducted by exchanges for transactions and must be handled manually for peer-to-peer (P2P) trades or foreign exchanges.

      3. Tax on Specific Crypto Activities

      • Mining: Mining income is taxed at 30%, with no deductions for expenses like electricity or equipment. Gains from selling mined cryptocurrencies are also taxable.
      • Airdrops: Tokens received via airdrops are taxable under “Income from Other Sources” at 30%.
      • Staking/Forging Rewards: Income from staking is taxed at 30%, and any sale of staked assets is subject to capital gains tax.
      • Gifts: Crypto gifts are taxed if their value exceeds ₹50,000, unless received from a relative or covered under exempted circumstances.

      4. Restrictions on Loss Set-Off

      • Losses incurred on one VDA cannot be set off against gains from another. For example, if you incur a loss on Bitcoin but profit from Ethereum, the loss cannot be adjusted against the profit.
      • Losses from VDAs also cannot be carried forward to subsequent years.

      5. Calculation of Tax

      • Gains = Sale price – Purchase price
      • Tax = 30% of gains + applicable cess (4%).

      How to Report and Pay Tax?

      • Include all crypto transactions in the new ITR forms under “Schedule – Virtual Digital Assets.”
      • Ensure TDS compliance for every transaction.

      Understanding these rules is critical for investors and traders in India to ensure compliance and avoid penalties. Using tools like cryptocurrency tax calculators can help simplify the process.