Cryptocurrency TAX / If you earn from cryptocurrency then how much tax will you have to pay- know

Cryptocurrency TAX: The trend of cryptocurrency is growing rapidly all over the world, and India is also not untouched by this global trend. Digital currencies like Bitcoin, Ethereum, Litecoin, Dodgecoin have attracted investors, some of whom have also invested huge amounts. However, the Indian government has clarified its policy towards these digital assets, due to which investors now need to understand how they have to pay tax on the income from cryptocurrency.

Cryptocurrency and India's tax law

Cryptocurrency in India is classified as “Virtual Digital Assets” (VDA), and in the 2022 budget, the government has clearly defined its status. Now, if you make a profit by selling cryptocurrency, then it is mandatory to pay tax on it. In the 2022 budget, the government had decided to impose a tax of 30% on it, which applies to any income from cryptocurrency.

Tax math

If you make a profit by selling cryptocurrency, a 30% tax will be applicable on it. For example, if you bought crypto for ₹1,00,000 and sold it for ₹1,50,000, you will have a profit of ₹50,000. You will have to pay 30% tax (₹15,000) on this profit.

Additionally, 1% TDS (Tax Deducted at Source) has also been implemented from July 1, 2022. This tax will be deducted on crypto transactions. If you make a transaction of more than ₹50,000 in a financial year, you will have to pay TDS.

Tax on mining and airdrops

Crypto mining is also now under the tax net. The crypto obtained from mining is taxed at 30%, but the expenses incurred in mining are not considered as any kind of deduction. Similarly, if you receive crypto for free from an airdrop, and it is traded on an exchange, it will also be taxed at 30%.

Tax on cryptocurrency received as a gift

If you receive cryptocurrency as a gift and its value is more than ₹50,000, it will be considered as your income, and will be taxed at 30%. However, if the cryptocurrency is received as a gift from a relative, it will not be taxed. It depends on the nature of the gift whether it is taxable or not.

Income Tax Return (ITR) and VDA Reporting

All income from cryptocurrency, be it trading, mining, airdrops, or gifting, is subject to tax rules. Moreover, you have to report these under “Virtual Digital Assets” (VDA) in your Income Tax Return (ITR). This ensures that your crypto income is taxed correctly.

Conclusion

The government's approach towards cryptocurrency in India is clear, and now investors should be ready to pay taxes on their income. Although there may be some complexities in the government policy towards cryptocurrency, success in this new financial era can be achieved by following the right information and rules.