Cryptocurrencies will now finally be taxed in India. In her Union Budget speech on February 1, Finance Minister Nirmala Sitharaman said the transfer of digital assets – and these include cryptocurrencies and non-fungible tokens- will attract a 30 percent tax. Additionally, all transfers of such assets will attract 1 percent tax deducted at source (TDS). Even gifting such assets will attract a 30 percent tax. But if the chatter has to be believed then the crypto people have reacted positively to this.
Since the cryptocurrency is not yet legalized by the Reserve Bank of India (RBI), it cannot escape from taxability. An investor earning profits from the sale of cryptocurrency must pay income tax. All incomes, except exempted explicitly by the Income Tax Act, are subject to tax. Till there is any clarification from the income tax department, investors must pay income tax on the crypto-transactions based on the nature of the transactions.
The new provision to tax crypto profits at 30 percent will come into force from April 1, 2022. So, it will not affect those who sell their crypto holdings this financial year. Crypto investors can look at booking profits or losses before March 31, 2022. So, if you are sitting on profits and sell your crypto holdings in this financial year, then there would not be taxed at 30 percent, which will be the case after April 1. The price of many cryptocurrencies has fallen so some may have incurred losses too. Now is the time to book losses – these can be carried forward and set off against gains made from other assets next year.
According to various reports, many crypto traders are finding it a great move as this will add much-needed recognition to the crypto ecosystem of India. By bringing in taxation, the government legitimizes the industry to a large extent. The majority of people, especially corporates, who have been sitting on the sidelines because of uncertainties will now be able to participate in crypto.
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