Are you unsure about how cryptocurrencies are taxed in India? You're not alone. With the growing popularity of crypto assets, many investors are confused about the tax implications. In India, cryptocurrencies like BTC are classified as Virtual Digital Assets (VDAs). The government has not yet given them a legal tender status, but they are recognised as assets for tax purposes.
Crypto Tax in India
Profits from crypto transactions in India are subject to a 30% tax rate. This applies to any capital gains you make from buying and selling cryptocurrencies. Additionally, a 1% Tax Deducted at Source (TDS) applies to all crypto asset sales exceeding 10,000.
Tax Deducted at Source
What is TDS?
A 1% Tax Deducted at Source (TDS) is deducted at source on the sale of any crypto asset (including BTC) on Indian exchanges. This acts as a pre-payment towards your final tax liability.
Who deducts TDS?
If you buy or sell cryptocurrency through an Indian exchange, the platform itself will deduct TDS on the transaction if it crosses the specified threshold. Exchanges are required to deduct TDS at the time of the transaction and deposit it with the government within a specified period. They must also issue a TDS certificate to the seller.
For P2P transactions or foreign exchanges, the seller is responsible for calculating and depositing the 1% TDS.
Capital Gains Tax
What is it?
A flat 30% tax is applicable on the profits earned from selling, swapping, or spending cryptocurrencies. Short-term or long-term capital gains are treated equally. There's no offsetting losses against profits or carrying forward losses in the current tax regime.
How to calculate?
The profit/gain is calculated by subtracting the cost of acquisition (including transaction fees) from the sale price.
Which ITR form to use?
You'll report your crypto gains/income for the financial year 2023-24 (Assessment Year 2024-25) using either the Income Tax Return (ITR) form 2 (if classified as capital gains) or ITR form 3 (if classified as business income).
The new ITR forms have a dedicated section called "Schedule VDA" specifically for reporting crypto transactions.
Reporting
Carefully track your crypto transactions, including purchase dates, quantities, and sale details. You can leverage crypto tax software or manual spreadsheets to simplify record-keeping. When filing your ITR, report your net crypto profits under "Schedule VDA".
Here's a step-by-step guide for filing your crypto taxes:
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Gather Records: Collect all your cryptocurrency transaction records, including purchase receipts, sale details, and exchange statements (if applicable).
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Calculate Capital Gains: For each transaction, calculate the profit/loss by subtracting the cost of acquisition from the sale price.
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Identify ITR Form: Depending on your trading frequency and volume, determine if your crypto income falls under capital gains (ITR-2) or business income (ITR-3).
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Report in ITR: Fill out "Schedule VDA" within your chosen ITR form, accurately reflecting your net crypto profits for the financial year.
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Pay Taxes: After calculating your total tax liability (considering TDS already deducted), pay any remaining tax dues before the due date.
Remember:
- Consult a tax advisor for personalised guidance, especially if you have complex crypto transactions.
- Stay updated on any changes in crypto tax regulations as they evolve.
- Check out the CoinDCX articles on Crypto Tax in India and and 1% TDS.
With the growing popularity of crypto assets, many investors are confused about the tax implications. Always aim to pay your taxes fairly on all your crypto gains.
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