India has nearly 15-20 million cryptocurrency with total crypto holdings of above $5 billion which shows vast interest among crypto investors. With this rapid growth, several crypto-unicorns have been emerging. Estimates also highlight the possible contribution of digital assets at $1.1 trillion by 2032.
In the budget of this year, Finance Minister Nirmala Sitharaman announced the proposal declaring cryptocurrencies, non-fungible tokens and any other asset are under ‘virtual digital assets’ which are now subject to gains tax, which is similar to stocks in the equity market.
CRYPTO TAX FOR INVESTORS IN INDIA
The government has proposed a new tax regime for the taxpayers in the Union Budget 2022. Crypto investors will have to pay 30 per cent tax on their profits.
For instance, if one invests Rs 1,00,000 on a crypto, and sells it at Rs 1,25,000. The investor needs to pay the tax on the profit which is Rs 25,000 rather than paying tax on the total amount.
This 30 per cent tax on profit also takes into account a 1 per cent Tax Deducted at Source (TDS) deposited by the facilitator, exchanges, or a person who is responsible for paying the consideration on every crypto transaction.
There will also be 30 per cent taxation on the receiver of crypto gifts.
TIPS TO PREPARE YOUSELF FOR TAXATION
Since you will be paying taxes in fiat currency, it is important for all the crypto investors to keep a track of their crypto gains and losses of every virtual digital asset before April 2022.
Individuals having profits on virtual digital assets have to file returns by filling the form which is called Income Tax Return 1, 2, 3, or 4 as applicable. Businesses have to file returns by filling the form known as Income Tax Return 5 or 6.
The move towards taxation by the Indian Government is a progressive step towards encouraging the digitalization giving a boost to the Digital India and $5 trillion economy visions.
(The article is written by Edul Patel, CEO & Co-founder of Mudrex)