The popularity of cryptocurrencies is currently on the rise. Digital currencies like Bitcoin, Ethereum, Litecoin, and Dogecoin are attracting significant investments. However, the landscape for cryptocurrencies in India is somewhat complex. In India, if you profit from selling cryptocurrency, you are required to pay taxes on that income. The government has categorized these as “Virtual Digital Assets” (VDAs), and income generated from cryptocurrencies is taxable. This was clarified in the 2022 budget, where a 30% tax on VDAs was announced.
Tax Calculation
When you sell cryptocurrency for a profit, it is subject to a 30% tax rate. Additionally, a 1% Tax Deducted at Source (TDS) has been implemented since July 1, 2022, which applies to crypto transactions. If your transactions exceed ₹50,000 in a financial year, TDS will be deducted. So, if you sell cryptocurrencies and earn a profit, you will face a 30% tax.
For instance, if you purchase crypto for Rs 1,00,000 and later sell it for Rs 1,50,000, resulting in a profit of Rs 50,000, you will owe Rs 15,000 in taxes at the 30% rate.
Tax on Mining and Airdrops
When you sell cryptocurrency, a 1% TDS will be deducted. Airdrops provide free crypto, and if you receive crypto through an airdrop and it is traded on an exchange, it will also be taxed at 30%. Furthermore, income from crypto mining falls under the same 30% tax rate. The value of crypto obtained from mining is taxable, but you cannot deduct any related expenses. Income from crypto staking or forging is similarly taxed at 30%.
