Use below calculator to calculate Income Tax on Virtual Digital Assets like Cryptocurrencies (Bitcoin, Ethereum & others), NFTs, etc.
In Budget 2022, Finance Minister announced about the income tax to be applied on making transactions in digital world. Many Indian youth believe that cryptocurrencies are the future and have been investing in various crypto coins including Bitcoin, Ethereum, Dogecoin, etc.
Though the cryptocurrencies are taxed from now on, there is no regulation yet governing cryptocurrencies in India. According to Finance Minister: “I don’t wait till regulations come in place for taxing people who are making profits. Can I?”
This move has also allowed the rumour to spread that Bitcoins are legal in India now due to tax implications, which might not be the case yet.
Finance minister also mentioned about Digital Rupee which will be India’s first digital currency based on blockchain technology. This Digital Rupee will be issued by RBI in this year.
Below are some of the question you might have in your mind:
Are Crypto Legal now?
Yes & No. India still doesn’t have a crypto law. What the new taxation does is, it gives legitimacy to crypto transactions and allows the government to oversee all the transactions. In simple words, it makes cryptocurrencies legal in India. However, they still remain unregulated.
Is Bitcoin a currency now?
No. The finance minister has clarified that only the digital currency issued by the Reserve Bank of India will be recognized as the currency. Bitcoin and other cryptocurrencies have only been classified as digital assets. It means while you can invest in them, they can’t be used to purchase things.
How to Calculate Income Tax on Cryptocurrencies?
Based on Budget 2022, 30% tax will be applied on the profits made due to selling of virtual digital assets. Apart from this 1% TDS is also levied while selling the asset. So the profits you make on selling such assets will attract 30% income tax and 1% TDS (Tax Deducted at source).
Crypto Tax Calculator Example
So for example, if you buy bitcoin for Rs. 1000 and sell for Rs. 2000, thus making a profit of Rs. 1000, 30% tax = Rs. 300 will have to be paid as tax for making this transaction. 1% TDS = Rs. 10 will be levied while the transaction is being made with the crypto exchange.
Below are some more points cleared in Budget 2022:
- Gifting virtual digital assets will be taxed at recipient’s end
- No exemption allowed of any type to save any income tax on crypto
- Losses incurred while selling crypto coins or digital assets will not be allowed to set off against your income to save income tax
- Digital rupee will be the currency issued by RBI and this will not be taxed
Will you pay tax on entire crypto investment?
No. You will only have to pay tax on your profit from cryptocurrencies. For example, if you have purchased cryptocurrencies worth Rs 4,000 and sell them for Rs 5,000, only Rs 1,000 will be taxed at 30 per cent and not the entire investment.
What does set off against long term loss means?
The current income tax law allow taxpayers to set off their long term losses against long term capital gains and short term losses against gains or income as well. It exempts taxpayers from paying tax on their long-term gains to some extent. However, that won’t be possible in case of crypto income.
Full crypto profits will be treated as a separate class of asset. Such proposed inclusion of tax provision in the income tax is a first step towards taxing the digital assets.
We cannot set off losses from crypto selling against other income in case you want to save some taxes.
If I gift someone a Bitcoin, will I be taxed?
No, you will not be taxed but recipient will be taxed when he/she sells the asset to liquidate. Same rules will apply for taxation purpose when gift recipient sells cryptocurrencies.
So one cannot avoid taxes by gifting crypto coins to friends or family members!
Which transactions will be subject to 1 per cent TDS?
Soon after her Budget 2022 presentation, finance minister addressed a press conference where she clarified that all crypto transaction that take place will be subject to a 1 percent tax deductible at source.
How Crypto Tax Calculator will help you?
Above crypto tax calculator will help you to know how much tax you’ll be paying on the profits you make after selling digital assets. This will give an idea about how much tax you are expected to pay to government along with the TDS deduction.
Some more reading:
Income Tax on Mutual Funds SIP
How to Save Income Tax [6 Options]