Union Budget 2023: Cryptocurrency Taxation in India

Cryptocurrency is a type of money like fiat currency, but it only exists in digital form; there is no physical currency involved. In 2008, a person who went by the name Satoshi Nakamoto made bitcoin, the first cryptocurrency that was widely used. Since then, there have been tens of thousands of other cryptocurrencies, such as Ether, Solana, and others. The Complete Guide to Crypto Tax in India, 2023

The Union Budget for 2023 was great news for the middle class because it changed the tax slab and gave the middle-class tax breaks on their income. But since there have been no announcements about crypto, and the blockchain, the Web3 industry in India is worried about its uncertain future.

In the last budget, Finance Minister Nirmala Sitharaman said that crypto would be taxed at a flat rate of 30%. This was not changed during this year’s session. 

What are Virtual Digital Assets which India’s finance minister refers to?

Before we get into how the government taxes “virtual digital assets,” also called “crypto assets,” and what they are talking about, let’s take a quick look at what are these. 

Crypto assets, such as Bitcoin and Ethereum, are virtual digital assets that don’t have a central administrator and run themselves using blockchain technology.

What happened in the 2022 Union budget about crypto tax in India?

In her Budget speech from the previous year, India’s Finance Minister Sitharaman introduced crypto taxation by bringing private cryptocurrencies under the umbrella of virtual digital assets (VDAs).

In the budget for 2022, a new section called 115BBH was added to tax crypto. Profits from Crypto trading are taxed at a rate of 30% (plus any applicable surcharge and 4% cess) (starting from April 1, 2022).

This rate is the same as the highest tax bracket in India (excluding surcharge and cess). This tax applies to private investors, business traders, and anyone else who moves crypto assets in a given fiscal year (subject to conditions).

Also, the 30% tax rate will be applied no matter what kind of income someone has. So it doesn’t matter if the money comes from a business or an investment, and there is no difference between short-term and long-term gains.

In addition, 1% TDS (Tax Deductible at Source under section 194S of the Income Tax Act) was added to Crypto transactions. This is true for all cryptocurrency transactions made on or after July 1, 2022.

On December 13, 2022, the government said that since the TDS rules went into effect in July, they had collected INR 60.46 crore in taxes from entities that had dealt in virtual digital assets (VDAs), such as cryptocurrencies.

To give one example:

If INR 3,000,000 was put into Crypto at the beginning of FY 2022 and you sold it for INR 350,000 at the end of FY 2022, you would have to pay a flat 30% Crypto tax on the gain (INR 50,000). 

In that financial year, as an investor, you will have to pay INR 15,000 (plus surcharge and cess) as a tax on your Crypto income.

Note that any income from Crypto transactions is only taxed when the asset is transferred. If someone keeps the asset, the unrealized gains are not taxed.

Continue reading here to know more: 

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