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A tax rate on par with the lottery is the tip of the iceberg though, and crypto investors will need to be aware of other provisions as well, to remain on the right side of the law in the financial year 2022-23.

India is said to have almost ten million cryptocurrency users, seeing about $100 billion in trading volume in 2021. By the calculations of the founder of WazirX, an Indian crypto exchange, that could yield $100 million (or 750 crore) additional income tax in a year.

A person who bought a crypto asset that increased in value greatly, but is yet to sell it, by definition has made no profits yet. Such crypto asset holdings where one has not realised the gains, will not qualify for tax until some portion of it is sold.

For example, if you had bought Bitcoin worth 40,000 and sold it at the same price without any profit, you would get back only 39,600. If you then invest the same 39,600 into buying Ethereum or NFTs, and again sell at no profit, you would again lose 1% to TDS and get back only 39,204. This TDS collected can be set-off against the total income tax owed at the end of the year.

This effect of making people think twice about whether a prospective trade is truly worth it, and thus clamping down on speculative trades could be intentional. As pointed out by experts, this TDS could steeply reduce the volume of crypto trade in India, once it is implemented in July 2022.

Avoiding the 30% crypto tax, and showing crypto profits as capital gains which is taxed at upto 20% plus surcharge, will not be allowed either.

As for cryptocurrency mining, the government is mulling over whether to tax the activity as a goods or service, to bring it into the fold of GST. The government also wants to make crypto trade on foreign crypto exchanges subject to GST.

Professionals and business-people will not be able to set-off gains or losses between their primary income and crypto income.

Until the current fiscal year, employees, students and senior citizens whose overall income added up to less than the minimum tax threshold ( 2.5 lakh) were tax-free. But now with a targeted crypto tax, it isnt clear if those earning less than the tax threshold will still need to pay tax on their crypto income.

For the period ending in March 2022, tax filings by crypto investors can still show business expense deductions. However, those who are liable for advance tax payment will have to move fast. The last day for paying advance tax is 15 March 2022, and delaying would add an interest of one percent of the tax owed, for each months delay.

While the tax rate on crypto stands at a flat 30% for the year 2022-23, the tax rate upon stock trading can range from zero (if filed as business income in zero tax slab) to 15% (if filed as short-term capital gain).

The proposed framework for regulating crypto is yet to be presented in Parliament, but the finance ministry is said to be working on a consultation paper, which is expected to be released for public comments in six months.

Disclaimer: This is not intended to be financial advice. We recommend making any major decisions after speaking to your tax consultant. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.

SEE ALSO:Adani group, IOC, BPCL, HPCL, Reliance, HDFC and other hot stocks on March 21The powerhouse behind Bored Ape Yacht Club has launched its own token, ApeCoin

Originally posted here:
Indias cryptocurrency tax kicks in from April heres what investors need to know - Business Insider India