Tax Implications of Cryptocurrency in India 2024: What You Need to Know Before You Invest!

In 2022, the Indian government introduced new tax rules for cryptocurrencies and other digital assets. Here's everything you need to know about crypto taxes in India in 2024. 

Key Points 

Crypto Tax Rates: 

If you make money from selling or trading cryptocurrencies like Bitcoin, Ethereum, and NFTs, you need to pay a 30% tax on your profits. This applies to all virtual digital assets (VDAs). You can't deduct any expenses except for the cost of buying the crypto. 

TDS on Crypto Transactions: 

A 1% Tax Deducted at Source (TDS) is taken from every crypto transaction. This means 1% of the transaction value is withheld as tax, regardless of whether you make a profit or a loss. The 30% tax rate started on April 1, 2022, and the 1% TDS began on July 1, 2022. 

Reporting Crypto Gains: 

When you file your Income Tax Return (ITR) for the financial year 2022-2023, you must report any income from cryptocurrencies under a section called Schedule VDA. 

G20 and Crypto Regulations:

Discussions at the G20 suggested that banning cryptocurrencies would be counterproductive. Instead, regulating them step by step within a global framework is considered more practical. 

Budget 2024 Updates 

The Interim Budget 2024 did not introduce any new changes to crypto taxation. The existing rules remain the same. 

What Are Virtual Digital Assets? 

Virtual Digital Assets (VDAs) include cryptocurrencies like Bitcoin and Ethereum, decentralized finance (DeFi) tokens, and non-fungible tokens (NFTs). They do not include digital gold or central bank digital currencies (CBDCs). 

Crypto Taxation Explained 

Income from VDAs:

Any profit from selling or trading VDAs, such as cryptocurrencies and NFTs, is taxed at 30%. No other deductions are allowed except for the acquisition cost. Losses from digital assets cannot be set off against any other income. Gifts of digital assets will be taxed at 30% in the hands of the receiver. 

Section 206AB of the Income-Tax Act: 

If you haven't filed your tax return in the last two years and have TDS amounting to INR 50,000 or more each year, the TDS on your crypto transactions will be 5%. 

Tax Scenarios for Crypto Transactions 

Selling Crypto for INR:  If you sell crypto for INR, you pay a 30% tax on the profit. Buying crypto with INR is not taxed. 

Trading Crypto for Crypto: Trading one cryptocurrency for another, including stablecoins, incurs a 30% tax on any profit made. 

Receiving Crypto Gifts and Airdrops:  If you receive crypto worth more than INR 50,000 as a gift or through an airdrop, you must pay a 30% tax on it. 

DeFi Income: Profits from selling, swapping, or spending DeFi tokens are taxed at 30%. 

Holding and Transferring Crypto: There is no tax on holding crypto or transferring it between your wallets. 

Penalties for Not Paying Taxes 

If you don't follow the tax rules, you can face severe penalties: 

Under-reporting Income: Fines range from 50% to 200% of the tax you didn't pay, plus possible jail time up to 7 years. 

Late Filing: Penalties include 1% interest per month on unpaid tax and late fees between INR 1,000 and INR 5,000, with possible jail time up to 7 years. 

TDS Non-Compliance: Failing to deduct or pay TDS can result in interest charges and late fees. 

How to File Crypto Taxes in India 

Report all your crypto income in the Schedule VDA section of your ITR. 

Make sure you follow the TDS rules and keep records of all your crypto transactions. 

Stay updated with any changes in tax laws. 

Conclusion 

Understanding and following the crypto tax rules in India is important. By paying the 30% tax on profits and complying with TDS requirements, you can manage your crypto investments responsibly in 2024. 

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