The Budget 2022 has given more light to the grey area of crypto space and India has taken a view that we want to treat it like assets and not like currency, so that it’s very obvious that any kind of transfers from one person to another is taxable. When it comes to such transfer of assets including sale of cryptos, income taxes are levied. This section of the Budget will be applicable for all sorts of Digital Assets and NFT’s.
- 30% taxes applicable on profits from trading in crypto.
Profits made at the sale of crypto or NFTs will be taxable at 30% tax without any deductions or exemptions. It would no longer be considered as Short Term or Long Term Capital Gains. There is no minimum profits provided for exemption, no matter how small the profit is, it will be taxable under the 30% slab.
- 1% TDS in order to record and monitor transactions
All the transactions will be taxed 1% as TDS. This is the Government’s approach to monitor all transactions happening in crypto space. This approach might prove to be slightly drastic for intra-day traders as they buy and sell on the same day and do multiple such transactions. The same traders will also be liable to pay 30% taxes on profit as well. This will also have its effect on the volume of transactions happening in crypto space within India. For the days to come, it might be a bad move from the government’s side to impose such high TDS, given some people are doing the transactions for small profits, especially for intra-day traders and short term investors.
- Gits will be taxable as well.
The gifts given to family or others were not taxable for fiat or any traditional asset, but when it comes to crypto, the crypto gifts will be considered for taxes and the recipient will be liable for taxes. It is unclear as to if the recipient should pay taxes considering the acquisition cost of those assets or if the entire amount becomes taxable.
- The losses of crypto trading cannot be offset by profits from other sources or the other way around.
The profits earned through crypto will be taxable without any exemption, but in case of loss in crypto, such losses cannot be offset through profits from other sources and vice versa. The losses in trading from crypto cannot be carried forward as well to the next financial year to be exempted from profits earned in the next year.
To make it more simple to understand the new tax rules, let’s take a look at the below example,
So far, it was falling in the same income tax slab of taxation starting from the income of 5 Lacs p.a. Because if a person’s income is 4.5 Lakhs, and the profits they made out of crypto is 60k, the total taxable income would be 5.1 Lacs and it would be as per income tax slabs.
But with the new tax regine in place, the 60k profit from crypto would get taxed directly at 30% followed by the normal slab based taxes for the person’s income of 4.5 Lakhs.
There are multiple factors and very minute details that need to be considered and it might be more difficult to file the taxes especially for intra-day traders considering the new TDS in place. Some relief was expected from this budget, but the high TDS and such high taxes of 30% might make people to be more cautious when they trade crypto, and at the same time, India is moving forward to the regulations in crypto space making us one of the first to have regulations. These regulations might seem a little heavy on taxpayers, but it also indicates how volatile the crypto market is. It’s high time for us to see how people react to it and it would be interesting what the future of Indian crypto space will be like.