India has currently passed a new bill in LokSabha wherein you will need to pay 30 percent flat tax on all your crypto profit, each trade. It is important that you note this 30 percent tax is not on your overall trade, but on each transactions, provided, it ends up in profit. The new crypto tax rule in India is very much similar to how speculative assets are taxed in India, much like gambling.
Not just that, you also have an additional surcharge and cess of 4 percent on 30 percent which is effectively 30 plus 1.2 percent i.e. 31.2 percent. Overall, a trader needs to pay 31.2 percent on their gains everytime you make a profit. However, losses can not be offset against any profits you made from other transactions.
This new crypto tax rule will come into effect from April 1, 2022.
Understanding India’s New Crypto Tax Rule, 2022: Example
For example: If you purchased Bitcoin worth 20 lakh, and sell it at 30 lakh, you make a profit of 10 lakh INR. You also purchased Ethereum worth 20 lakh, and sell it at 10 lakh, you make a loss of 10 lakh INR.
In this case, if the same would have happened, in stock market, you had to pay no tax, as your net profit is zero. However, since it is crypto, you will still need to pay 30 percent tax on your Bitcoin gains, and Ethereum losses can’t be offset.
Here, even if your net profit is zero, you still have to pay 3 lakh INR as taxes to the Indian government. An additional 12,000 as cess also is to be added. So the trader, which is you end up paying 3.12 lakh to government even at zero profit.
The Indian Government, with the new crypto tax bill, has made the life of the crypto traders difficult, and this may result in a drastic change in the trading volume of the Indian crypto exchanges.
Coming to the TDS on cryptocurrency trade, you need to pay 1 percent TDS on each trade from July 1 2022. However, there is a loophole here. This TDS is applicable only when you trade between two Indian entities, which is common in Indian exchanges.
However, when you trade in decentralised exchanges or foreign centralised exchanges, 1 percent TDS may not be applicable assuming you traded against a foreigner, who is not a resident of India.
However, I am expecting more clarities from the Indian government in the upcoming days.
Will you need to pay GST on your Crypto purchase?
As of 27th March, 2022, you do not need to pay GST on your crypto purchase. However, crypto exchanges pay 18 percent GST on the service charges they charge from you based on your transactions. You pay 3 percent GST on buying GOLD, but for crypto this is not yet applicable. In my opinion, there would be no GST even in future, for buying and selling crypto in India.
Taxes in NFT Transactions
If you are airdropped an NFT, you need to pay 31.2% taxes on the sell amount of your NFT. For example, if you sell your NFT at 1 ETH, you need to pay 31.2% taxes i.e 0.312 ETH. On the sale day, let’s say ETH is priced at 300000 INR, then you need to pay taxes 93600 INR.
To keep things simple, you can sell the ETH to INR and then buy back the ETH with the remaining amount.
If you purchase your NFT at 1 ETH and sell at 2 ETH, then you need to calculate as per INR amount, and pay taxes accordingly.
What happens to your crypto if you sell after April 1, 2022?
If you sell on or after April 1, you need to pay 31.2 percent net tax on each of your profit.
Should I sell all my crypto assets before 1st April, 2022?
If you are sitting at a good gains, and you do not wish to pay 30 percent tax, it is advisable to sell your crypto assets to INR on or before 31st March, and pay taxes as per your income tax slab. Here, you will be able to cut off your profits against the losses you have made in the financial year, 2021-2022.
If you are sitting at a loss, it does not make any sense to sell now and buy after April 1. Best is to hold your crypto if wish to stay in crypto for a long term. Here, based on your purchase history, you will have to calculate your net profit, and pay taxes accordingly in future, whenever you sell.
How will the crypto airdrops be taxed after 1st April 2022?
According to me, you will need to pay 30 percent taxes whenever you sell. You do not need to pay taxes based on when you received. Because, in crypto you may be airdropped any SCAM coin where you see the value to be in millions, does not necessarily mean you need to pay taxes on the then value, as trying to swap the coin may end up in swapping your entire wallet. Considering it is a legit airdrop, according to me, you need to pay taxes only when you sell them to USDT or INR. Also to keep things simple, always swap against USDT/INR so that on the day of calculating your taxes, it becomes easier for you.
Here your acquiring cost is zero. So you can’t deduct any expenses in case of airdrops.
TDS as per the new crypto tax rule
From 1st of July, exchanges will be deducting 1 percent on all your trades as TDS. It will then be paid to Govt. TDS is a kind of advance tax, which you can set off while filing your tax.
Please note I am not a certified CA and whatever I have shared in this article in entirely my opinion based on my understanding. Please do not hesitate to consult your CA before filling your crypto taxes.
If you have any questions regarding the new Indian crypto tax rule 2022, drop a comment in the comment section below and we will do our best to reply you at the earliest.
