As of March 2024, understanding crypto trading taxes for transactions in India is not just beneficial but essential for every investor. This guide aims to demystify the taxation rules surrounding cryptocurrencies, providing you with a clear, detailed, and easy-to-understand overview of how much is the taxation on cryptocurrency in India in various scenarios including trading crypto.
Key Takeaways
- Tax Rate on Crypto Gains: Cryptocurrency gains in India are taxed at a flat rate of 30% plus a 4% cess. This tax applies to various crypto transactions including trading, mining, and exchanging cryptocurrencies for goods and services.
- TDS on Transactions: A 1% Tax Deducted at Source (TDS) applies to crypto transactions under certain conditions, effective from July 1, 2022. The TDS threshold is ₹50,000 for most individuals in a financial year and ₹10,000 for specific cases.
- Calculation of crypto trading taxes: Taxes are calculated based on the gains, which is the difference between the sale price and the cost price of the cryptocurrency. Different methods, such as Year-to-Date (YTD) and transaction-based returns, can be used depending on the investor’s preference.
- No Deduction for Losses: Losses from cryptocurrency transactions cannot be carried forward or set off against other income, as per Section 115BBH. This highlights the importance of careful investment planning and risk assessment.
- Disclosure and Compliance: Companies must disclose their cryptocurrency transactions and holdings in financial statements. All individuals and entities earning gains from cryptocurrency must accurately report and pay taxes on these earnings, emphasizing the need for compliance with the Indian tax regulations.
| Taxes in Crypto | Tax Rate |
| Tax Rate on Trading Gains | 30% (plus 4% cess) under Section 115BBH |
| Tax Deducted at Source (TDS) | 1% under Section 194S |
| Effective Date for TDS | From July 01, 2022 |
| Transaction Threshold for TDS | ₹50,000 for most transactions in a financial year; ₹10,000 in some cases |
In the table above, you can see that crypto taxation of 30% is applicable irrespective of the tax slab an individual falls into.
How to Calculate Your crypto trading taxes
Crypto taxation of 30 % is levied on crypto trading, mining, buying and selling after holding for any period,crypto-to-crypto swaps, P2P transactions, exchanging crypto for goods and services, airdrops and income earned from staking.
Calculating taxes on cryptocurrency transactions involves determining the gains, which are the difference between the sale price and the cost price.
For example, if you purchase cryptocurrency, say Bitcoin for ₹60,000 and sell it for ₹80,000, the taxable gain would be ₹20,000, attracting a 30% tax. Additionally a TDS of 1% (wherever applicable).
Investors should keep in mind that losses made in crypto transactions are not allowed to be carried forward for set off.
Methods of Calculating Crypto trading taxes
| Calculation Method | Approach Description | Key Formula or Strategy |
| Year-to-Date (YTD) Profit | Ideal for long-term holders, comparing portfolio value at the start and end of a year to determine unrealized gains. | Compare portfolio value at two different times to find unrealized profit. |
| Transaction-Based Returns | Calculates profit or loss for each individual transaction, considering the dynamic costs and selling prices. | s−c=p Where, s = selling price c = cost (including fees) p = profit |
| Open vs. Closed Positions | Monitors trading performance by differentiating between initial trades (open) and their subsequent sell-off or counter-trade (closed). | Analysis based on the categorization of trades into open and closed positions. |
To accurately assess the profitability of your cryptocurrency trading activities, one has the flexibility to employ different methods of calculation based on your trading strategy and preferences. Specifically, individuals can opt for either the Year-to-Date (YTD) method or the transaction-to-transaction approach to determine the gains or losses incurred from their crypto transactions.
What to Consider while Filing crypto trading taxes
Navigating the complexities of cryptocurrency taxation in India requires a thorough understanding of various factors that influence the calculation of taxes on crypto investments. Here are some crucial considerations:
Transaction Factors Impacting Profitability
When calculating the profit and loss of your crypto investments, it’s essential to account for additional costs such as transaction fees, the impact of exchange rates, and the timing of your transactions. These factors can significantly affect the overall profitability of your investments. Regular monitoring and calculation of your crypto portfolio’s profit and loss, especially after significant transactions or during market volatility, are recommended to stay informed about your investment performance.
Non-Deductibility of Crypto Losses
According to Section 115BBH, losses incurred from cryptocurrency investments cannot be offset against any other income, including gains from other cryptocurrency transactions. This regulation prohibits investors from using losses in one year to reduce their taxable income in the following years. It’s crucial for crypto investors to understand this limitation when filing their Income Tax Returns (ITR).
Mandatory Disclosure for Companies
The Ministry of Corporate Affairs (MCA) mandates that companies disclose their gains and losses from virtual currencies in their financial statements. Additionally, companies must report the value of their cryptocurrency holdings as of the balance sheet date. These requirements, incorporated into Schedule III of the Companies Act starting from April 1, 2021, mark a significant step towards the regulation of cryptocurrencies in India. While this mandate applies specifically to companies, it highlights the government’s approach to increasing transparency in crypto transactions.
Tax Obligations for Individuals
Although the disclosure mandate from the MCA applies only to companies, all individuals and entities earning gains from cryptocurrency must report and pay taxes on these earnings. In India, gains from cryptocurrencies are taxed at a rate of 30%, along with any applicable surcharge and a 4% cess, under Section 115BBH. This tax rate underscores the need for all crypto investors to be diligent in calculating and reporting their taxable income from crypto transactions accurately.
Along with the above considerations investors should also keep in mind the regulatory requirements with respect to TDS on transactions.
TDS on crypto became applicable in India from 01, July 2022.
What is the TDS on crypto in India?
Here’s a table presenting the scenarios where TDS is applicable in crypto transactions, along with exceptions and exemptions:
| Scenario | TDS Applicability | Details |
| Selling Cryptocurrency for INR | Yes | A 1% TDS is deducted from the total transaction value. |
| Buying Cryptocurrency with Another Crypto | Yes | TDS is applicable on the value of the cryptocurrency used for the purchase. |
| Selling Cryptocurrency for Another Crypto | Yes | A 1% TDS is charged on the INR value of the cryptocurrency sold. |
| Exceptions and Exemptions | ||
| Transactions below Rs 50,000 (for individuals) / Rs 10,000 (for others) per financial year | No | These transactions are exempt from TDS. |
| Transferring crypto between wallets owned by the same individual | No | TDS is not applicable on these transfers. |
Summary : Tax on Crypto Trading In India
Selling price – Cost price (including fees) = Profits
30% flat rate is applicable on every profits made via trading along with 1% TDS and 4% cess on tax.
Example:
Calculate your crypto trading taxes with Mudrex
Explore Crypto Tax Calculator by Mudrex and calculate your tax liability on your crypto gains. It only takes 3 steps to find out taxes on crypto via Mudrex:
- Enter the entire amount received from the sale of your crypto assets.
- Enter the initial investment amount (no deduction benefits are available except for the cost of acquisition)
- Your net profit will be displayed on your screen along with the tax you are liable to pay, as per the provisions of section 15BBH.
