The world of crypto taxes in India can be tricky as the crypto niche is nascent and still evolving. Many portfolio managers, cautious about the volatile nature of cryptocurrencies, often need to be more precise in recommending investments in this area, leaving a gap in guidance on tax implications.
But worry not—here is a comprehensive guide to cryptocurrency taxation in India. This guide offers a complete walkthrough on TDS for crypto, when taxes apply (and when they don’t), how to figure out your crypto taxes, and answers to all your burning questions.
| Key TakeawaysTaxation landscape of cryptocurrencies in India.Significance of Tax Deducted at Source (TDS) in crypto dealings.Tax rates and implications for various crypto transactions.How to calculate and report crypto taxes effectively. |
What is Crypto Taxes in India?
| Transaction Type | Tax Rate | TDS | Additional Notes |
| Trading Cryptocurrency | 30% | 1% | Gains from buying and selling cryptocurrencies are taxed. |
| Receiving Cryptocurrency | 30% | – | Payment for services, airdrops, and mining – taxed at fair market value on the date of receipt. |
| Mining Cryptocurrency | 30% | – | Acquisition cost is ‘Zero’; no expenses are deductible. |
| Staking/Forging | 30% | – | Income at the time of receipt is taxed and again upon sale. |
| Crypto to Crypto Swap | 30% | 1% | Both parties in a swap transaction are subject to TDS. |
| Spending Crypto on Goods/Services | 30% | 1% | Tax applies on the gains if the crypto used had appreciated in value since acquisition. |
| Gifting Cryptocurrency | Varied | – | Taxable if value exceeds ₹50,000 and not exempt. Receiver’s tax may apply based on specific conditions. |
| P2P Transactions | 30% | 1% | Buyer is responsible for deducting TDS. Includes buying with INR on P2P platforms. |
| Mining and Staking Income | 30% | – | Taxed at fair market value at the time of receipt. No deduction for acquisition cost or expenses. |
| Airdrops | 30% | – | Taxed on fair market value at the time of receipt and again upon sale. |
| Crypto Gifts | – | – | Taxable if value > ₹50,000 unless exempt (e.g., from relatives, on marriage, etc.). |
| Losses from Crypto Transactions | Not offsettable | – | Losses cannot be offset against other income. |
| Disclosure Requirements | – | – | Mandatory for companies; voluntary for individuals but recommended. |
Notes:
- Tax Rate: The flat rate of 30% applies to all taxable gains from cryptocurrency transactions, irrespective of the duration for which the cryptocurrency was held.
- TDS: Tax Deducted at Source at a rate of 1% applies to transactions over certain thresholds. This system is intended to ensure tax compliance and transaction tracking.
- Additional Notes: Provides further details on specific conditions or exceptions for each transaction type, including exemptions and conditions under which certain transactions may not be taxed or taxed differently.
Crypto Taxation Scenario in India
The crypto taxation landscape in India has evolved to establish clear tax obligations for individuals and businesses engaging in cryptocurrency transactions. The government has set a flat tax rate of 30% on all taxable events within the crypto space, aiming to clarify how crypto assets are taxed.
In addition to income tax, a Tax Deducted at Source (TDS) of 1% is imposed on certain transactions. This mechanism ensures tax compliance and facilitates the tracking of these digital asset exchanges.
How to Calculate Your Crypto Taxes
TDS on crypto is calculated on the transaction value. 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% is deducted (wherever applicable). Also a flat rate of 30% is applicable irrespective of the tax slab an individual falls into.
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.
Learn more about crypto trading taxation here.
Calculating taxes on cryptocurrency transactions involves determining the gains, which are the difference between the sale price and the cost price. Investors should keep in mind that losses made in crypto transactions are not allowed to be carried forward for set off.
Calculate your Crypto Taxes with Mudrex
Explore the Crypto Tax Calculator by Mudrex and calculate your tax liability on your crypto gains.
TDS on Crypto Transactions
What is TDS in Crypto Transactions?
For cryptocurrency transactions in India, a 1% TDS rate has been implemented.
This measure aims to bring greater transparency to the growing digital asset market and meticulously track the movement of these assets.
By applying TDS to crypto transactions, the government is making a progressive move in the crypto ecosystem. It discourages tax evasion and ensures that all participants in the crypto market are contributing their fair share to the national treasury.
Through this initiative, both the government and the crypto community can work towards a regulated environment where digital assets can thrive securely and transparently.
Here is a table of scenarios where TDS on crypto in India, along with exceptions and exemptions:
When to Pay TDS on Crypto in India
| 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. |
The Significance of the 1% TDS Rate
The 1% rate is designed to be low enough not to hinder the regular trading of cryptocurrencies while ensuring that the government can monitor and tax these transactions efficiently.
Basis of TDS Calculation in Crypto Trading
TDS on crypto is calculated on the transaction value. For example, if you sell Bitcoin worth INR 100,000, a TDS of INR 1,000 is deducted. It’s applicable when buying or selling crypto, exchanging one cryptocurrency for another, or transferring crypto against goods and services.
Official Start Date for TDS on Crypto Transactions
The TDS provision for cryptocurrency transactions came into effect on July 1, 2022. Transactions executed before this date are not subject to TDS.
Taxation on Specific Scenarios of Crypto Transactions
1. P2P Transactions
In peer-to-peer transactions, the buyer is responsible for deducting and remitting the 1% TDS to the government. This fosters a culture of accountability and transparency in the crypto space.
2. Crypto-to-Crypto Swaps
These transactions are subject to a 1% TDS from both parties, ensuring that tax obligations are met even when fiat currency is not involved.
3. Mining and Staking
The income from mining and staking is taxed at the point of receipt and again when such assets are sold, with the initial acquisition cost considered as zero. This reflects the government’s stance on rewarding the computational contributions of individuals to the blockchain network.
Tax Rate: The flat rate of 30% applies to all taxable gains from cryptocurrency transactions, irrespective of the duration for which the cryptocurrency was held.
TDS: Tax Deducted at Source at a rate of 1% applies to transactions over certain thresholds. This system is intended to ensure tax compliance and transaction tracking.
Mudrex Collab with ClearTax
Thanks to an integration with ClearTax, Mudrex users can easily request detailed tax statements within the platform. This feature simplifies tax reporting for crypto investments by generating comprehensive, ClearTax-derived tax calculations based on their crypto investments with Mudrex.
Conclusion: Taxation on Crypto in India
Understanding crypto taxes in India requires knowing the regulations, taxable events, and compliance rules. With the Indian government’s firm stance on the taxation of Virtual Digital Assets, investors are better positioned to make informed decisions and ensure their investments are both profitable and compliant.
As the digital currency market continues to evolve, staying informed about the latest tax regulations will be crucial for anyone looking to invest in cryptocurrencies in India. This guide serves as a comprehensive resource, aiming to demystify the complexities of crypto taxation and empower investors with the knowledge needed to navigate the crypto economy with confidence.
FAQs
1. How much tax is charged on cryptocurrency in India?
A flat rate of 30% plus cess and a 1% TDS on transactions exceeding specified thresholds.
2. How to calculate taxes on cryptocurrency?
Taxes are calculated on the gains, which is the sale price minus the cost price.
3. How to report cryptocurrency on tax returns?
For the financial year 2022-23 and onwards, investors need to use the ITR-2 or ITR-3 forms, depending on whether the gains are categorized as capital gains or business income.
4. Is TDS deducted if I transfer crypto between my own wallets?
No, TDS is not applicable on wallet transfers if they belong to the same owner.
5. Can I claim a refund on TDS if my tax liability is lower?
Yes, you can claim a refund for the excess TDS deducted when filing your income tax returns.
6. What if I fail to deduct or pay TDS?
Complying with TDS regulations is mandatory. Non-compliance can lead to hefty penalties, including fines and imprisonment.
