in

How Crypto Is Taxed As Property Asset In India?

In India, there is no official tax on cryptocurrency. However, it can be taxed if it’s used for remit payments. The Indian government’s stance on crypto taxation is that this method of payment should not be treated as a commodity like fiat currency used by banks, but rather as a transaction tool similar to social media and online shopping platforms. For now, crypto transactions in India are governed by the rule of law and not regulated by the RBI (Reserve Bank of India). Crypto tax will be regulated after a few years by the RBI till then crypto taxes are considered as property tax in India. 

This may change soon. Until then, you’ll need to pay your taxes accordingly. In this article, I will show you different aspects of crypto tax in India and how much tax should be paid on crypto in India.

The Indian government’s initial response to cryptocurrencies was to approach the topic cautiously. However, the tremendous popularity and huge trading volumes garnered by crypto and virtual digital assets (VDAs) recently prompted the government to take action, resulting in the cryptocurrency tax laws, which clearly state the tax implications on digital asset management.

Major Highlights of Cryptocurrency Taxation in India

Cryptocurrency is considered Property for tax purposes, not a currency. This means that the gains from your crypto transactions are treated as capital gains. Gains from trading or holding crypto are considered income-taxable in India when the domestic cumulative value of the crypto being traded or held has crossed over $400,000 mark from April 1st 2017 to March 31st 2018 (Finance Act 2017). To make sure you don’t miss out on any taxes, let me tell you that capital gains are treated separately from other income sources and taxed differently as well . What does this mean? That all the gains from your cryptocurrency transactions will be taxed at separate rates from your other forms of income.

In Union Budget 2022, the Finance Minister announced the cryptocurrency tax in India at a flat rate of 30 percent on any income from the transfer of VDAs. Additionally, another section 194S dedicated to the treatment of Tax Deducted at Source (TDS) in the event of a transfer of a VDA was also announced. 

How is cryptocurrency considered as property in India?

Let’s take a look at the I-T Act of India, specifically section 2(44) of the Income Tax Act. According to section 2(44), “Assets” are legally defined as both tangible and intangible assets and include deposits, stocks, bonds, shares or securities. Further down in the same part (section 2(45)), we find a new type of asset called “intangible assets” which includes rights such as Intellectual Property Rights (IPR). This essentially means that cryptocurrencies are legally considered as intangible assets for tax purposes in India and you will be needed to file tax accordingly.

The Indian government’s initial response to cryptocurrencies was to approach the topic cautiously. However, the tremendous popularity and huge trading volumes garnered by crypto and virtual digital assets (VDAs) recently prompted the government to take action, resulting in the cryptocurrency tax laws, which clearly state the tax implications on digital asset management.

What is the TDS on VDAs and Cryptocurrencies?
 

Any person buying VDAs or cryptocurrency must deduct a TDS of 1 percent of the total amount paid to the seller, according to section 194S of the Income Tax Act. The government has specified a certain limit, beyond which all transactions will attract TDS at the time of credit of the said payment.

  • In case of non-availability of the seller’s PAN, the tax will be deducted at source (TDS) at 20%.
  • If the individual has not filed their prior year’s IT return and the aggregate of TDS and TCS of that year is more than Rs 50,000/-, TDS will be charged at 5%.

Tax Season is Here

India finished its 5th annual tax season which runs from July 1st through September 30th. Anyone with a taxable income over 10 lakhs (~$13000) or with any kind of reinvested income or business income will have to file their return by September 30th 2018 this includes crypto capital gains tax.

Remember, your crypto-related taxes are calculated differently than they are on your fiat income. This is because the Indian Tax law doesn’t provide a clear definition of what cryptocurrency is. As such, whether you’re trading or holding crypto, the tax rules are tricky and you need to be aware of how they work.

You might find these instructions not that clear as the tax rule for crypto is not considered that much in India. If you are finding any trouble in the tax filing of crypto then you can use an online crypto tax service like Binocs which will help you to file your crypto tax automatically without any hidden charges.

hen will the transfer of VDAs and Cryptocurrencies attract TDS?
 

Here are the conditions under which taxes CBDT will apply (that is, TDS on VDAs).

  • The total amount of transfer of VDAs by the specified person during the financial year exceeds Rs 50,000.
  • The total amount of transfer of VDAs by anyone other than the specified person during the financial year crosses Rs 10,000.

Who is a specified person?
 

Here is the definition of ‘specified person’ as per the cryptocurrency tax laws.

  • An individual or Hindu Undivided Family (HUF) that has no income under the head profit and gains from business or profession
  • An individual or HUF having income under the head profit and gains from business or profession whose
    • Total sales/receipts/turnover from business is not more than Rs 1 crore in the financial year immediately preceding the financial year in which the VDA is transferred
    • Total income from profession is not more than Rs 50 lakh in the financial year immediately preceding the financial year in which the VDA is transferred

Conclusion

The government’s primary objective for enabling the cryptocurrency tax in India is to bring about regulation in the crypto market that will deter casual investors from dabbling in the field without the required knowledge or research. Besides, by introducing TDS on every transaction beyond a certain limit, the government can keep track of every crypto or VDA transaction and maintain records of the same. 

Written by Ocean

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

MangaOwl

MangaOwl: Safe to Use?

What is Elon Musk IQ Level – 2023