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This last week was huge for the crypto industry in India. While there’s much to be desired in terms of the amount of tax levied, the formal recognition of crypto as an asset by the Government, will facilitate flow of capital from a larger number of institutional and retail investor.
In this week’s rollup, we cover the announcements made in the budget session, news of regulation from around the world, India mythology NFTs and a lot more. Enjoy!
Article #1: India Recognises Crypto as an Asset and Issues Applicable Tax Slab
In this week’s budget session a number of rules applicable to crypto transactions were announced. Recognising and taxing is itself a huge milestone for the industry as now trading and investing can be carried out without any fear. The announces were as follows:
- Crypto gains will be taxed at 30%
As per the announcement any game made through crypto trading in a particular financial year will be taxed at 30%. The gain is calculated as the current price of the asset minus the cost of acquisition. The current understanding is that taxation will apply only when the asset is sold and converted back into INR. If the asset is held for an entire year, tax will not apply irrespective of the assets gain.
- TDS of 1% will be applicable on all transactions
There will be a 1% tax deducted at source when any crypto asset is purchased. As per the current understanding, exchanges will levy this when you purchase any token. For e.g. if you buy INR 100 worth of bitcoin, you will receive INR 99 (minus platform fees) in your wallet after deduction of TDS. Wallet to wallet transfers will not get affected since this is only an exchange from one place to another in the eyes of the Government. Legally speaking, crypto cannot be used for the purchase of any goods or services.
- Losses cannot be offset with other income
If you experience a loss while trading cryptocurrencies in a particular financial year, these losses cannot be offset against any other income. For e.g. if you are earning INR 100 annually from your salary, fixed deposit interest etc. and you end up losing INR 25 while trading crypto, your income tax will be calculated on INR 100 and not on INR 75.
- Gifts will be taxed in the hands of the receiver
If you gift your crypto holdings to any family member, the amount of crypto gifted will be taxed at a flat 30% of its value on the day of transfer.
- Introduction of India’s CBDC
The digital rupee, developed using blockchain technology, will be launched in financial year 2022/23.
The above observations are made basis the limited information provided during the Budget session. This may be subject to change. Please consult a financial advisor before making any decisions.
Read more on the finer details of this announcement, here .