Your cryptocurrency transactions will be taxed. What it means?

While presenting the Budget, Sitharaman has also said Reserve Bank of India (RBI) will launch its own digital currency or digital asset of cryptocurrency.

The announcement has brought closure to long-drawn speculations on how the Government of India will approach the evoloving digital currency space, especially with concerns raised from various sections.

Income from the transfer of any virtual digital assets will be taxed at 30%, Finance Minister Nirmala Sitharaman said in her budget speech. However, losses from sale of digital assets cannot be offset against other income, she added.

Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around ₹40,000 crore ($5.37 billion). No official data is available on the size of the Indian crypto market.

The crypto market in India grew 641% in the year through June 2021, according to an October report from Chainalysis, an industry research firm.

Livemint decodes what cryptocurrency taxation means for investors.

The 30% tax on cryptocurrencies is irrespective of short term or long term holdings unlike in the equity markets, where there is separate taxation depending on the time period.

Experts said the 30% tax levied on income arising from the sale of cryptocurrency is similar to the tax rate on winnings from lottery, game shows, puzzles etc.

The government has declared its intent to go after cryptocurrencies by introducing its own digital rupee and seeking to tax gains on sale of crypto currencies at the rate of 30%. Further to track down crypto gains a TDS of 1% has also been proposed whereby persons engaging in crypto trading will not be allowed to escape the tax net, said Anshuman Khanna, Director at ValPro.

Investors of cryptocurrency need to pay a tax of 30% on the profits or any income gained from the transfer of digital assets. There will also be a tax on any kind of transfer of cryptos including in the form of gifts and from one wallet to another.

“As expected taxation regime on cryptocurrency has been introduced. However the proposed regime appears to be stringent and appears to be in line with speculative income,” said Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co.

“Taxation of virtual digital assets – at 30%. No deduction other than cost of acquisition. No set off permitted against other income. Tax withholding to be triggered on sale at 1% beyond certain threshold. Deduction for employer contribution to NPS increased from 10 % to 14% for state govt employees on par with central govt employees. Not extended to non- govt employees,” said Saraswathi Kasturirangan, Partner, Deloitte India.