Guide to Crypto Taxes in India for 2024
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In India, crypto earnings are subject to a 30% tax rate, including capital gains and mining income, with an additional 1% Tax Deducted at Source (TDS) on crypto transactions implemented in July 2022. This TDS is deducted at the time of purchase and can lead to potential tax refunds if it exceeds the total tax liability.
To report crypto taxes in India, individuals use Income Tax Return (ITR) forms 1 to 4 based on their income sources and circumstances. The Indian tax year runs from April 1 to March 31, with typical ITR deadlines on July 31, although extensions may occur due to e-filing system issues.
In 2022, the Indian parliament passed new tax rules that are not friendly to crypto. Below, we outline the changes affecting how you file your crypto taxes in India.
How is cryptocurrency taxed in India?
The new law passed by the Indian government taxes crypto earnings at 30%. This includes not only capital gains but also income from crypto mining. It is the same rate applied to gambling winnings.
What is the tax deduction at source (TDS)?
The 30% tax includes a 1% tax deduction at source (TDS) that went into effect in July 2022.This is a sum that is deducted at the time of purchase; centralized exchanges (CEX) are responsible for making this deduction, but it is unclear how this rule would be enforced for decentralized exchanges (DEX). Investors will receive a tax refund if the sum of their TDS is more than their entire tax liability.
Crypto advocates have vehemently opposed the TDS, saying it will stifle the crypto industry in India and cause accounting nightmares. For example, in the Economic Times, crypto advisor Anoush Bhasin points out that because pairs trading involves two separate transactions, investors in crypto pairs will be taxed twice: 1% on each asset.
In late June 2022, the Central Board of Direct Taxes (CBDT) clarified that it would be the responsibility of exchanges to deduct the TDS from crypto transactions and pay them to the government within 30 days of the end of the month in which the trade was made. The relevant transaction and payment would be reported on a new form called the 26QE. Additionally, the exchange must provide documentation of the payment to the trader.
If you make a peer-to-peer crypto swap (i.e., not through a crypto exchange), you will need to obtain a tax deduction account number (TAN) so that the TDS can be applied.
How do I report my crypto taxes in India?
Individual crypto taxes are reported on Income Tax Return (ITR) 1, 2, 3, or 4, depending on one's personal circumstances.
The forms’ descriptions from the Income Tax Department are as follows:
ITR 1: For resident individuals with income less than Rs.50lakh coming from salaries or wages, one house property, other sources (interest, etc.), and/or agriculture up to Rs.5 thousand.
ITR 2: For individuals or Hindu Undivided Families (HUFs) who do not have income from operating a business
ITR 3: For individuals or HUFs who are operating a business or acting as an individual director in a company
ITR 4: For resident individuals, HUFs, and non-LLP businesses with salary or wage income less than Rs.50 lakh who also have income from operating a business
What is the Indian tax deadline?
The Indian tax year runs from April 1 to March 31, with ITRs usually due on July 31. However, in recent years, there have been glitches with the Indian e-filing system that have pushed the deadline back, so we advise you to keep an eye out for extensions to the deadline.
Learn more about crypto taxes in our crypto tax guide.
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Frequently asked questions about crypto taxes in India
Here are answers to frequently asked questions about India crypto taxes, how crypto is taxed in India, and topics including crypto mining, gas and transaction fees, and more.
Can crypto losses offset capital gains?
Can I deduct Bitcoin mining expenses from my crypto taxes?
No. India's new crypto tax law does not allow miners to add their infrastructure costs to a mined asset’s cost basis.
Can I deduct ETH gas fees or transaction fees from my crypto taxes?
No. Indian crypto taxpayers may not add any ETH gas fees or transaction fees to a traded asset’s cost basis.
How is the 1% Tax Deducted at Source (TDS) applied in India's crypto taxation?
The 1% Tax Deducted at Source (TDS) in India's crypto taxation applies to all sell transactions of crypto assets, and it came into effect on July 1, 2022. This TDS is deducted from the final sale amount, irrespective of whether you earn a profit or incur a loss on the trade.
Can crypto losses be used to offset other income in India?
No, according to the new Indian crypto tax regulations, you cannot offset crypto losses against other sources of income. This means that losses incurred from crypto trading cannot be used to reduce your tax liability on other income sources.
Are crypto mining expenses deductible in India for tax purposes?
No, under India's new crypto tax law, you cannot deduct expenses related to crypto mining from your taxable income. Even if you incur infrastructure costs while mining, they cannot be added to the cost basis of the mined assets for tax purposes.
How are crypto gifts taxed in India?
Crypto gifts in India are subject to a 30% tax, and this tax liability falls on the gift recipient. If you receive crypto assets as a gift and their total value exceeds INR 50,000, you must pay a 30% tax on the received assets.
What are Virtual Digital Assets (VDAs) in India's crypto taxation, and how are they taxed?
Virtual Digital Assets (VDAs) in India refer to digital assets like cryptocurrencies and NFTs. These assets are taxed at 30% on the gains incurred from their sale, with an additional 1% tax if the transaction amount exceeds INR 10,000. Understanding the tax implications of VDAs is essential for anyone participating in the crypto market in India.
How is crypto taxed in India?
In India, cryptocurrency is subject to a 30% tax on earnings, covering both capital gains and income from crypto mining. Additionally, a 1% Tax Deduction at Source (TDS) is applied and deducted at the time of purchase.
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Last reviewed by Tynisa (Ty) Gaines,EA on December 29, 2023 · Sources