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Indian Crypto Tax Regime Applicable from April 1, 2022

The new crypto tax regime still needs further clarity.

February 1, 2022, was a watershed moment in India’s economic history as the Finance Minister of India, Ms. Nirmala Sitharaman announced the crypto tax regime.

This is a great relief from the present ambiguous tax regime.

Income Tax on Crypto

As per the announcement, any income from the transfer of any Virtual Digital Asset shall be taxed at a rate of 30%. Government is yet to clearly define what transfer means in this context.

Another aspect to that is while calculating tax, one cannot set off any loss or expenditure except the cost of acquisition. So, one cannot save taxes on crypto generated income by showing any expenditure upon the net income.

TDS and Gift Tax

Gift of Digital Asset is also proposed to be taxed at the receiver’s end.

The most dreaded aspect of this regime is the Tax Deduction at Source (TDS) at the rate of 1% on every transaction above a monetary threshold. Here too it has to be known what the monetary threshold is.

Regarding the Gift Tax, it has to be answered if airdrops or staking rewards will be considered a ‘gift’ or ‘income’? Gifts up to INR 50,000 in a year are exempt from Gift Tax.

Dates of Commencement

The income tax of 30% will come into effect from the upcoming financial year 2022-23 beginning from April 1, whereas the TDS will begin to be levied from July 1.

Taxes on Foreign Based Crypto Exchanges

Vivek Johri, the Chairman of the Central Board of Indirect Taxes and Customs (CBIC), has clarified that transacting on a crypto exchange located abroad is also liable to be taxed under the Goods and Services Tax (GST). It will have to be paid on reverse charge basis. It means the liability to pay tax is on the recipient of the service.

NFTs Will Have Special Status

Government has taken cognizance of emerging technologies such as Non-Fungible Tokens (NFT), which do not have speculative transactions.

A room for relaxation for NFTs in Finance Bill 2022. 

The specific clause from the Finance Bill reads:

“non-fungible token” means such digital asset as the Central Government may, by notification in the Official Gazette, specify;

Many see this tax regime as partial recognition of the crypto industry.

However, many are dreading the current version of details and are asking for more clarity, especially regarding the TDS provisions. As the financial year progresses, more clarity will be achieved as people will start filing taxes every month, and the operational details will come to light.

News recommendation: Two Crypto Frauds in Hyderabad Dupe People of INR 1.21 Crores

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