The union budget 2022 of India was recently announced by the country’s finance minister. As one of the leading crypto markets in the world, India had high hope from the governments regarding clarity on the status and regulation of cryptocurrencies in the country. Well, the 2022 budget doesn’t disappoint at all.
The key crypto market highlights of the India budget 2022 include plans to launch a blockchain-powered Digital Rupee by the RBI (Reserve Bank of India) and the announcement of 30% tax on crypto profits and 1% TDS on every single crypto transaction. Though there is still much clarity needed in relation to the actual legal status of crypto trading in India, by applying taxes on crypto transactions the Indian government has made it clear that it is not against cryptocurrencies.
Let’s find out more about everything that the new budget said about cryptocurrencies and crypto trading in India.
What is cryptocurrency?
In the budget of 2022, the government has made a note of the term Virtual Digital Asset, which refers to crypto and non-fungible tokens (NFT). It defines Virtual Digital Asset as “any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically…”
Cryptocurrencies under Section 56 of the IT Act
The 2022 budget puts virtual digital assets under Section 56 of the Income Tax Act, which means cryptocurrencies or NFTs received as a gift will be taxed as “Income from other sources” and a 1% TDS will be payable by the recipient of such virtual digital assets. As such, crypto transactions will also be eligible for the 50,000 cap available for gifts.
Taxation on Cryptocurrencies
Virtual digital assets, including cryptocurrencies, will be taxed under the new Section 115BBH. According to this, any income or profits made from the trading of virtual digital assets will be taxed at a fixed rate of 30% of the profit.
For example, if you make a crypto trade and end up making a profit of INR 100 from it, you’ll have to pay a 30% tax, i.e. INR 30 as tax on your crypto income.
No expense other than the cost of acquisition can be claimed against the income made from virtual digital assets. Also, traders are not allowed to set off or carry-forward losses incurred from cryptocurrencies.
Every other type of cryptocurrency transaction, including direct transfer of virtual digital assets between people will be taxed at a flat 1% under Section 194S.
The new tax regulations for cryptocurrencies and other virtual digital assets in India are expected to open doors for the development and growth of high-end virtual currencies and platforms such as the Libra Coin and will also make it easy for people to invest in digital currencies and become a part of the ever-growing crypto world.
Originally published at thecapital.io