Budget 2022 How Govt plans to tax your future crypto transactions

Union Budget 2022 offered much needed clarity on taxation of cryptocurrencies and other virtual digital assets as Finance Minister Nirmala Sitharaman on Tuesday proposed a 30 per cent tax on income from transactions in such assets.

Also, to bring such assets under the tax net, she proposed a 1 per cent tax deducted at source (TDS) on transactions in virtual digital assets.

Gifts in crypto and virtual digital assets will also be taxed, she said.

The tax proposals will come into effect from April 1 after the passage of the Union Budget in Parliament.

Meeting demands from large sections of industry, she said the RBI will launch a ‘Digital Rupee’ based on blockchain technology in fiscal 2022-23.

Experts said the 30 per cent tax levied on income arising from the sale of cryptocurrency is similar to the tax rate on winnings from lottery, game shows, puzzles etc, PTI reported.


Aside from placing earnings from cryptocurrencies and non-fungible tokens (NFTs) in the highest tax band, FM Sitharaman also said losses from their sale could not be offset against other income, delivering another disincentive to trading and investment in digital assets.

Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees (USD 5.37 billion). No official data is available on the size of the Indian crypto market, Reuters reported.

Tax consultants reckoned individuals could end up paying more than 30 per cent of their crypto profits in tax and other charges.

“If you made a profit of Rs 100 then including the 30 per cent tax bracket, plus surcharge and cess the total tax outgo will be around Rs 42,” Amit Maheshwari, partner at AKM Global, a tax and consulting firm told Reuters.


Crypto exchanges also hoped the new tax regime would signal acceptance of digital currencies by the authorities, and reassure corporates that they can enter the market.

“Thirty percent tax on income from virtual digital assets, while high, is a positive step as it legitimises crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs,” said Avinash Shekhar, chief executive of ZebPay, a cryptocurrency exchange.

“Tax on virtual goods is indirectly good as it now brings digital currency under regulatory supervision, a very positive push for cryptocurrency and Web 3.0. This would incentivize startups to create more products and services in the blockchain ecosystem,” Harsh Shah, a co-founder of Fynd, said.

” The government has brought in 30 per cent tax on cryptos income, where no deduction for any expenses except cost of acquisition will be allowed. The gift of virtual assets will also be taxed for the recipient. This clears the air on taxes for cryptos. However, there are several types of incomes people earn from cryptos and hopefully more clarity will be available in the Budget documents,” said Archit Gupta, Founder and CEO – Clear.

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