First lets understand what are the taxes on cryptocurrency & then come to why?
Budget 2022 tax announcements for cryptocurrency in India are -
- Income (Any gains or losses made from a crypto asset held less than 12 months / Financial year) from any transfer of crypto, even gifts, would attract a 30% tax
- Investors will also have to face additional 1% TDS (Tax Deducted at Source) on digital asset transfers above a certain threshold, which will allow it to capture transaction data with the government.
- In addition, investors cannot get any deductions and won’t be allowed to set off losses from transfer of such assets against any other income.
- As a disclosure requirements the taxpayers will have to report income from crypto through a separate column while filing I-T returns.
- RBI-backed ‘digital rupee’ to be launched in FY23.
Now, Let’s understand Why such huge tax on crypto?
The higher tax rate also hints at tougher crypto regulations & government wants people to be aware of the higher volatility & risk into crypto market before investing into crypto.
- Lets, take an example to understand the tax system on crypto trading.
I assume that you have booked a profit of Rs.100 earned by trading crypto on any crypto exchange.
So, the tax on Rs. 100 profit is :
Net Profit = Rs.100 — (Net Loss, if any in current financial year)
(I assume you have Net Loss = Rs.0. So, Net Profit = Rs.100 — Rs.0 = Rs.100)
Tax on Net Profit = ( 30% of Rs.100 + 1% of Rs.100 ) = ( 0.3 * Rs.100 + 0.01 * Rs.100 ) = Rs. 31
So, your Tax on your Net Profit is Rs. 31
Thanks for reading till the end! Hope it helps…
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