The Indian Ministry of Finance presented new tax proposals for cryptocurrencies in February, stating that the capital gains tax would take effect on April 1, 2022.
That date has been clear since then. But what else do crypto holders need to know to stay informed?
What the taxation of virtual digital assets says
As part of the budget speech, Finance Minister Nirmala Sitharaman announced a 30% capital gains tax on all virtual digital assets (VDA). She also introduced a 1% TDS deduction on all crypto transactions.
The crypto community has also learned, following clarifications released two weeks later, that losses from one asset cannot be set off against gains from another asset.
Importantly, mining expenses will not be allowed when calculating the cost of acquisition for tax purposes. In addition, the use of VDAs as gifts will be considered a taxable event.
Note that non-fungible tokens (NFTs) are also included in the category of virtual digital assets.
Key dates
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April 1, 2022 – 30% capital gains tax on VDAs comes into effect.
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July 1, 2022 – 1% TDS deduction on all cryptocurrency transactions.
Government should rethink policy, crypto chief says
“Tomorrow the new crypto tax comes into effect. The Indian government should reconsider this tax policy,” Nischal Shetty, CEO of crypto exchange WazirX, tweeted on Thursday.
He warned that these taxes could push people to trade on foreign exchanges, trade without KYC, or turn to grey markets. There could also be significant tax evasion, not to mention potentially large TDS refund claims.
“A flat 30% tax rate may not be the best outcome because it does not consider long-term and short-term gains based on the holding period of digital assets,” Rishi Anand, partner at DSK Legal, told The Times of India.
“Gifting digital assets may not become mainstream under this tax regime,” he added.