Crypto asset: How you may save 10% tax on long term capital gains by March 31


The new tax laws on crypto and other digital assets will come into effect from 1 April 2022. However, there is no mention of cryptocurrency sales being taxed in Budget 2022 for the current fiscal year. Now, the question arises of how the gain up to March 31, 2022, will be treated as the new provisions will be applicable from FY 2022-23. There could be two views of this situation as there is no clarity in the Budget in this regard.

What the experts are saying

Most experts agree on one view and that is there is a lack of clarity on this. According to one viewpoint, gains realised before March 31, 2022, can be classified as long-term capital gains and taxed at a rate of 20% after deducting costs. According to another viewpoint, tax should be paid at a rate of 30% because there are no particular provisions in the legislation in this regard, and tax can be paid according to the newly proposed law.

As per one expert view, you will have to pay less tax on capital gains, if the booking is done till 31 March 2022 as from 1 April, a flat 30% tax would be payable on these.

“The applicability of 30% tax will be starting from 1st April and booking earlier will drastically reduced tax burden, to be exact 10% reduced tax rate till 31st March, as 20% is still on the large. The capital gain from crypto gain is not a new term but the government is giving a certain relief to the current booking of long term crypto gains if one would that before the 31st March 2022. However, we are still away from a proper clarification on the final taxation and how it will be done and this may create a much larger confusion than prevailed earlier,” said Amit Gupta, MD, SAG Infotech.

Another expert said that the 30% tax proposed in Budget 2022 on these gains needs to be paid even in the current fiscal to avoid any litigation.

“To avoid future litigation, we believe that tax should be paid at a rate of 30 per cent. The government is also anticipated to provide essential clarification in this regard, “said Pramod Chandrayan, Co-Founder & CTO, FinMapp.

“Hodling is the best strategy to generate considerable wealth in the crypto market, which is extremely volatile and not friendly for retail investors with a short term view. Now that the Government has decided to tax over the crypto gain @30 %, it will be interesting to know how the Crypto gains will be taxed in the running fiscal year as there is no blueprint for the same,” he added.

As per one expert view, to keep things simple any capital gains over crypto which was held for more than 36 months and then sold can be taxed @ 10–15 % considering these provisions are already there for other asset class, but if the gains are made from short term holding, it can be taxed @ 20–25 % which may resonate well with the crypto investor. Taxing less for long-term holding will be a welcoming move as it will promote a healthy investing discipline among crypto investors and help them generate considerable corpus which can indirectly be a good contribution to our nation’s economic growth. The more people will make money out of long-term investing the more they will give back to the nation through taxes.

While presenting Budget 2022-23, Finance Minister Nirmala Sitharaman said that the transfer of digital assets, including crypto and non-fungible tokens (NFTs), will be subject to a 30% tax. Furthermore, all transfers of such assets will be subject to a 1% tax deducted at source (TDS). Even gifting such assets will result in a 30% tax.

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