Will Cryptocurrency Be Legal In India?
Finally there are signs of Crypto becoming legit in India. The Finance Minister presented the Budget on February 1st, 2022 in which virtual assets such as cryptocurrency were brought into the tax net.
Following months of confusion over cryptocurrencies’ legal position in the country, the government announced a 30% tax on the gain of crypto assets, bringing more clarity to the regulation and tax treatment of cryptocurrencies. As a result, most of the fear, uncertainty, and doubt from the crypto sector have been removed by Budget 2022. Some see this move as positive as some see this as negative.
A quick glance at the important things that you should know about virtual asset taxation in India:
- Any profit earned from the transfer/sales of virtual digital assets including cryptocurrencies like Ethereum, Bitcoin, Dogecoin, etc will now be taxed at a rate of 30%.
- Other than the cost of acquisition, no expense is deductible.
- Losses incurred on virtual assets cannot be set off against income earned from other sources.
- Virtual digital assets received as presents (gifts) will be taxed in the recipient’s hands.
- The payment will be subject to TDS at the rate of 1%.
- Losses will not be allowed to carry forward.
When will the new taxation rule come into force?
The new taxation regime will come into effect from April 1, 2022.
Will there be any other charges or taxes on digital assets?
Yes, in addition to tax and TDS, a 4% education cess is also applicable on the tax amount.
How will it affect the investors?
The number of transactions in virtual digital assets has skyrocketed. Many people interpret the finance minister’s announcement as recognition of the crypto business as a new asset class. However, you should keep in mind that cryptocurrencies are not yet legalized. Nevertheless, the government has made it apparent that all cryptocurrencies will not be banned in India as the Finance Minister announced to launch India’s very own digital currency in the coming years. If you are a virtual asset investor or trader, you can plan your investment strategies keeping the above points in mind.