Trading in cryptocurrencies has never been easy in India and after the initial confusion, all cryptocurrencies were banned for a long time. However, things have changed quite a bit in the last two years.
It’s still confusing, of course, but at least the Finance Bill of 2022 has officially confirmed the legality of trading cryptocurrencies in India. As we highlight some of the most important sections of the bill next, you will find yourself having a comparatively easier time with this year’s cryptocurrency tax calculations.
Page Contents
30% Flat Rate
This is perhaps the simplest rule about crypto tax in India, although that does not make it any less expensive. As of 1st April 2022, any profits earned from crypto trades will be taxed at 30% flat. Keep the keyword Profit in mind, though, because that’s what we will be explaining in the next section.
Calculating Your Crypto Tax
According to the updated Financial Bill of 2022, any income generated from trading cryptocurrencies will be taxed at a flat rate of 30%. Therefore, if you were to buy Ethereum worth INR 10,000 at OKX right now and sell it later in 2023 for INR 25,000, you will have to pay INR 4,500 as tax to the Income Tax Department of India as your crypto tax for that transaction.
- (INR) 25,000 – 10,000 = 15,000 profit
- (INR) 30% of 15,000 = 4,500 (Tax amount)
To calculate your entire year’s crypto tax, you will have to figure out how much profit you earned during the financial year through crypto trades in total.
Not a Part of the Regular Income Tax Slab
Your crypto tax in India is not a part of your regular income tax slab. That means you will have to pay 30% of your cryptocurrency trade profits to the IT Department, irrespective of how much you may or may not have paid already as income tax from your other sources of income. Even if your income is within the tax exemption range, it will not exempt you from paying the 30% flat rate tax from your crypto profits.
Chapter 3: Virtual Digital Assets Include NFTs
If you are invested in P2E games with real-life financial returns, or if you deal in NFTs, be ready to pay 30% of your total profits per transaction. Yes, non-fungible tokens and money earned through P2E crypto games are also part of the 30% flat tax slab. Note that roughly 85% – 90% of your crypto earnings from video games will be subject to the 30% slab. However, if you are trading assets such as expensive GIFs, digital artwork, etc. then your tax amount will be deducted only from the profit earned.
These should be enough to provide any interested Indians with a clear idea of what to expect in terms of crypto trading taxes this year. Nevertheless, You can and most likely should download The Financial Bill, 2022 from the official website for more information regarding taxes in general and other facets of crypto investment taxes.
***
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency trading involves high risk, and is not suitable for all investors. Before deciding to trade cryptocurrencies, tokens or any other digital asset you should carefully consider your investment objectives, level of experience, and risk appetite. TaxGuru does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions. By the use of the above information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
