7 points to understand how crypto assets in India will be taxed  

Cryptocurrency assets will be taxed: From 1st April 2022, some changes in the income tax rules announced by Finance Minister Nirmala Sitharaman while presenting Union Budget 2022 will be implemented.  

One of them is a tax on cryptocurrency and other digital assets. 

Nirmala Sitharaman in the Union Budget 2022 announced that “any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent.

“The new regime of flat 30% taxation on income from crypto assets from April 1, 2022, will ebb the sentiments for the new age asset class. Though, we hope that the crypto investors will back their investment thesis and stay in with the investment for longer periods," said Kunal Jagdale, Founder, BitsAir Exchange.

How cryptocurrency assets in India will be taxed explained in 7 points 

1. 30% taxes on Digital Assets: The gain on the sale of cryptocurrency will be taxed at a 30% tax rate. This taxation impacts post-tax returns of cryptocurrency transactions. So that means if you have purchased crypto for ₹15k (USD 198) and sold it for ₹45k (USD 592), your straightforward gain is ₹30k (USD 394), and you will be liable to pay 30% on that amount, which is about ₹9k (USD 119).

2. Tax deducted at source on cryptocurrency transactions: TDS at 1% will be implemented for transactions involving cryptocurrency. 

3. The threshold limit for TDS will be ₹5k (USD 658) a year for specified persons, which include individuals and Hindu Undivided Families (HUF), who are required to get their accounts audited under the Income Tax Act.

4. 1% TDS will come into effect from 1st July 2022, while 30% digital assets tax will be effective from 1st April 2022.

5. Crypto received as a gift will be taxable: If you receive a gift in the form of cryptocurrency or any other virtual digital asset (VDA), you will be liable for taxation on this gift post 2022 budget. However under the Income tax act in India, gifts received from families or relatives or on occasions like weddings are generally tax-exempted.

6. The new tax scheme will not allow any deductions in respect of any expenditure or allowance while computing such income except the cost of acquisition, as per finance minister Nirmala Sitharaman. That means infrastructure cost incurred in mining VDAs will not be considered as cost of acquisiton. It will be regarded as being capital in nature and hence not deductible.

7. The new tax scheme also addresses losses incurred from crypto assests. Losses arising from the transfer of a VDA will not be allowed to be set off against the income arising from another VDA.

All these make the government's stance very clear with respect to the taxation of a virtual digital asset. It would be interesting to see how value is attributed to an exchange of virtual digital asset and how a gift of such an asset is valued," said Sridhar R, Partner- Tax, Grant Thornton Bharat.

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