Cryptos and Digital Assets! Now that’s what dominated Budget 2022. You have seen it already and know your cryptocurrency will be taxed in India at 30% already.
After all, everybody is talking about it – The media, the social media, the news channels! Twitter is even going bonkers over this latest development. Interestingly, there are assumptions that taxations of cryptos = legalization of cryptos, which of course is a dubious interpretation. Besides, the fact remains that the government in past too expected people to report all the income generated from sales and transfer of cryptos.
However, now that cryptocurrencies will be taxed at 30% and there is TDS involved too, let’s see –
How Your Cryptocurrency Transactions Will Be Taxed in India?
For starters,
You will have to pay 30% tax on the gains made from selling or transferring your cryptos or any other digital assets like NFT. In addition, every time you commit a transaction, someone will also deduct tax at source (TDS). Now, this will amount to 1% of the total sale value. So, each and every transaction will be captured by the Government of India.
However, while the profits will be taxed at 30%, your losses will not be set off against other losses or be carried forward.
For instance, if you have made two transactions during a year, one where you turn a profit of Rs. 100 and one where you lose Rs. 50. Then the Government of India in the case of cryptocurrency will not consider the net loss i.e. Rs 50 which it otherwise considers everywhere including the stock market trading. So, here you will have to pay taxes on your first profit of Rs. 100 and you cannot consolidate your loss in the second transaction with the first one.
Now, let’s consider this taxation rule in bigger amounts. Suppose you make a profit of Rs. 1 lakh in a bullish market but in the same year in another transaction you lose Rs. 1 lakh 25 thousand, so basically you have made a net loss of Rs. 25,000 and nothing should be charged from you. This is true for everything else, but not cryptos. Here, you will have to pay 30% on your profit of 1 lakh and completely forget about your losses in the bearish market. Now is this fair?
Crypto is qualified under asset class but the tax bracket is par with speculative activities such as money earned from gambling, lotteries, and other gaming activities. Yes, the crypto tax rate is not even close to other asset classes even though trading crypto requires specific skills.
What’s Next?
Well, the way your Cryptocurrency transactions will be taxed in India, coupled with the GOI launching its own digital currency (RBI is coming up with CBDC – Central Bank Digital Coin) is a clear indication that it is indirectly discouraging it. The center shall not permit crypto as a currency and at this tax slab, only HNI’s could make such investments.
Forget attracting new crypto investors it will also demotivate the existing aam aadmi crypto investors – What do you think?
