Is Crypto Legal In India?
Yes, owning and trading cryptocurrency is legal in India. The Reserve Bank of India classifies cryptocurrencies as Virtual Digital Assets (VDAs) for tax purposes. However, cryptocurrencies have not attained the status of legal tenders in India.
How Much Tax Do You Pay On Crypto?
Crypto taxes in India depend on the nature of the transaction you incur. Suppose you are earning crypto income or salary in crypto. In that case, such transactions will be categorised as income from other sources, making it liable for income tax at regular slab rates.
If you enjoy a profit by selling, exchanging, or transferring crypto tokens, then it will be liable to a 30% flat capital gains tax plus a 4% health and education cess. As per Section 194S of the Income Tax Act, the buyer will deduct a 1% TDS on the selling amount and deposit it against your PAN number, which can be refunded if you do not have any tax liability in the said financial year.
Is There A 30 Percent Tax On Crypto In India?
Yes, any gains from cryptocurrency disposal or swap attract a flat capital gains tax rate of 30% in India. Disposal means selling, exchanging, or transferring crypto tokens and assets. Moreover, you also need to pay a 4% health and education cess on your capital gains tax amount. You can use KoinX’s free crypto tax calculator to calculate your capital gains accurately.
Do I need to file taxes if I Don’t make any profit this year from my crypto activities?
Yes, you should file your Income Tax Return (ITR). Even if you didn’t book any profit and incurred losses from selling cryptocurrency, FIU-compliant exchanges must deduct TDS (Tax Deducted at Source) at 1% of the selling amount. Filing your ITR is necessary to claim a refund of the TDS deducted, which ensures compliance with tax regulations and potentially allows you to recover any excess tax paid.
Did you know that not filing your ITR can lead to a higher TDS deduction of up to 5% from the source?
What is Schedule VDA?
Schedule VDA is a section of specific Indian iIncome tTax rReturn (ITR) forms introduced in the Union Budget of 2023. It’s where you report any income you earned from buying and selling VDAs, like Bitcoin, Ethereum, or even NFTs. The government uses it to track and tax your crypto activity.
Can I File Crypto Taxes Without Schedule VDA?
No, you cannot file crypto taxes without including Schedule VDA. You must report crypto gains under the Schedule VDA section in your Income Tax Return (ITR).
Which ITR Form Should Be Filled For Crypto Tax?
To file your crypto taxes for FY 2023-24 (AY 2024-25), you’ll use Income Tax Form ITR-2 (for reporting as capital gains) or ITR-3 (for reporting as Business Income). These forms include specific sections for reporting crypto gains or income. You’ll report your crypto profits under “Schedule VDA” within the tax return.
How To Pay Zero Tax On Crypto?
In India, one way to minimise taxes on crypto gains is by utilising the rebate under Section 87A of the Income Tax Act. This rebate is designed to alleviate the tax burden for individual resident taxpayers, particularly those with lower incomes. You can opt for the older tax regime, where the income threshold is INR 5,00,000, with a rebate of INR 12,500. Depending on your total income and tax strategy, these provisions can help you reduce or eliminate taxes on your crypto investments.
Note: The new tax regime doesn’t allow rebates for crypto incomes under section 87A
Can I Avoid Paying Taxes On Crypto?
No, there’s no legal way to avoid paying taxes on crypto in India. You must report your crypto gains under Schedule VDA in your ITR. Moreover, underreporting or misreporting crypto income can lead to a penalty of 50% to 200% of the tax due and up to 7 years of imprisonment. For more details, read our guide on crypto tax evasion in India.
How Much Crypto Profit Is Tax-Free?
There isn’t any amount of crypto profit that is tax-free in India. As per the Income Tax department, any profit you generate from selling, transferring, or exchanging cryptocurrency will attract a 30% CGT plus a 4% health and education cess.
Is A Loss On Crypto Taxable?
No, losses on cryptocurrency are not taxable in India. Moreover, you cannot use losses from cryptocurrency assets to offset your profits and carry these losses to subsequent financial years.
How Do I Pay Taxes On Crypto?
You can file your crypto taxes using ITR-2 (For reporting capital gains) or ITR-3 (For reporting business income). These forms feature a specific section to declare crypto gains or income under “Schedule VDA” in your tax return. Refer to our guide for step-by-step instructions, complete with screenshots for filing with the new Schedule VDA.
What Happens If I Don't Pay Crypto Taxes?
Please report crypto income in your Income Tax return to avoid a notice issued by the Income tax department under sections 148 or 148A of the Income Tax Act. Referred to as a ‘notice for income escaping assessment,’ this notice is issued when the Income Tax Officer (ITO) suspects inaccurate income disclosure and unpaid taxes.
The process involves two steps: initially, the ITO sends a 148A notice to the taxpayer, providing an opportunity to explain or contest why a section 148 notice shouldn’t be issued. If the ITO suspects undeclared income, they have up to three years from the end of the relevant assessment year to issue a 148 notice. This extends to 10 years if the undisclosed income exceeds Rs 50 lakhs.
The ITO will reassess your income under section 147 of the Income Tax Act upon issuance of a notice.
Is Salary In Crypto Taxable?
Yes, salary in crypto is taxable in India and liable for Income tax. It is treated like any other salary you receive in fiat currencies. You need to calculate the total fair market value of all the cryptocurrencies on the date of receipt.
This will be totalled as your gross income while filing your ITR. Please note that if you enjoy a gain from selling, transferring, or exchanging any cryptocurrency you received as a salary, you must pay a CGT of 30% plus a 4% cess.
What Is The TDS Penalty For Crypto?
Crypto transactions in India have distinct tax Deduction at source (TDS) reporting requirements. When dealing with local exchanges, the exchange handles TDS obligations.
However, for international exchanges or peer-to-peer trades, buyers must deduct 1% TDS as per section 194S and deposit it with the government using either form 26QE or 26Q, depending on their status. Failure to comply may result in penalties, including fines and imprisonment.
Is Sending Crypto To A Friend Taxable?
Sending crypto as a gift to a friend is not taxable in India. However, the friend may have to pay income tax if the fair market value of the received cryptocurrency exceeds INR 50,000 in a single financial year. If your friend gets the crypto as a wedding gift, that transaction is tax-free, irrespective of the amount.
Is Income From Crypto Taxable?
Yes, crypto income earned through mining, staking, airdrop, or yield farming is liable to tax in India. The fair market value of tokens received as crypto income will be added to your ITR under the “Income From Other Source” section.
Moreover, if you dispose of these crypto tokens and gain a profit, then that will be taxed at 30% plus a 4% cess.
How Do I Declare Bitcoin On My Taxes?
The declaration of Bitcoin on your Income tax return depends on the mode of transaction through which you earned or sold Bitcoin or any other cryptocurrency. If you have received a salary in Bitcoin or minted, staked, or airdropped Bitcoin, then the Fair Market Value (FMV) of the token at the date of receipt will be added to your IFOS (income from other sources).
However, if you have sold, transferred, or exchanged the Bitcoin at a profit, then that will be categorised under Capital Gains.
Please note that you won’t pay crypto taxes in India if you transfer Bitcoin from one wallet to another, hold your Bitcoin, or buy Bitcoin using fiat currencies.
Are Crypto Airdrops Tax In India?
Yes, airdrops are taxable in India. They are taxed akin to crypto in India.
You will be subject to income tax based on the token’s fair market value at receipt. To calculate your income, you must assess the token’s value on the day of receipt in Indian Rupees (INR). Airdrops may qualify for tax exemption if the gifts’ total value stays below INR 50,000 annually.
Do I Have To Pay Tax If I Mine Crypto In India?
Yes, you must pay taxes if you are mining crypto in India. Mining for a hobby is treated as income from other sources, while mining for profit is treated as business income, allowing deductions for expenses.
Income tax is levied based on the fair market value of mined cryptocurrency converted to Indian Rupees. Additionally, selling minted crypto for a profit makes you liable to pay 30% CGT plus a 4% cess.
Is Crypto Staking Taxable in India?
Yes, crypto staking is taxable in India. It is based on mechanisms that will owe income tax at individual rates upon receiving rewards based on the fair market value in INR on the day of receipt.
When you decide to sell, swap, or spend the rewards earned through staking, you will attract a 30% tax on the profits made, plus a 4% cess.
Which Transaction Does Not Attract Crypto Tax in India?
In India, certain crypto transactions are tax-exempt. Holding and transferring crypto between your wallets incur no tax. Gifts of crypto under INR 50,000 from friends and relatives, or any amount from close family members, are also tax-free. Tax obligations are waived for HODLing crypto and specific gift scenarios per Indian regulations.
Do I Have To Pay Tax If I Invest In NFTs?
Yes, you will have to pay tax on NFT if you have used cryptocurrency as a purchase medium. The ITD will label this transaction as crypto disposal, and any profit you make from exchanging crypto for NFT will be liable to a 30% CGT and a 4% cess.
However, if you purchase an NFT using fiat currencies, you will not be liable to pay any crypto taxes.
How Are Crypto Futures Trading Taxed In India?
Calculating taxes on crypto futures trading in India involves several steps. Initially, buying cryptocurrencies like USDT for futures trading isn’t taxed, similar to buying stocks or commodities.
These are treated as business income when you start trading and making profits. Taxes are calculated based on the difference between the rates used to calculate your profit and the rate at which you initially bought the crypto.
When you convert your crypto holdings into Indian Rupees (INR), two parts are taxed:
- Tax on Principal Amount: This is the gain from the difference between the conversion rate and your initial purchase rate, taxed at 30% plus surcharges.
- Tax on Profit Amount: This is the gain from the difference between the conversion rate and your profit realisation rate, also taxed at 30% plus surcharges, with an additional 4% for health and education cess.
Additionally, there’s a 1% Tax Deducted At Source (TDS) on the transaction value of USDT converted to INR.
Is There GST on Cryptocurrency in India?
As of now, the Indian government hasn’t provided clarity on whether Goods and Services Tax (GST) applies to cryptocurrencies. The GST Act doesn’t explicitly mention Virtual Digital Assets (VDAs), and only suppliers of goods are typically responsible for GST collection. Major Indian crypto exchanges request clarification regarding GST’s applicability to crypto assets.
Which Crypto Exchanges Deducts TDS in India?
All crypto exchanges in India are legally bound to deduct and deposit TDS on behalf of their users. Some prominent crypto exchanges are WazirX, Coin DCX, Coinswitch Kuber, and Zebpay.
Do I Have To Pay Taxes If I Donate Cryptocurrency in India?
Yes, crypto donations are taxable in India. Donating crypto is considered an act of crypto disposal, and any gain from the transaction will be subject to a flat 30% capital gains tax plus a 4% cess.
Need more details on how crypto donations are taxed in India? Read our detailed guide and solve all your queries in one go!
When Do I Have To Report Crypto Taxes To The Income Tax Department?
In India, the financial year spans from April 1 to March 31 the following year. All income, including from crypto, must be reported for this period by July 31 unless undergoing an audit, in which case the deadline extends to October 31. For the most recent financial year, FY 2023-24, taxes are due by July 31, 2024, or October 31 for audited taxpayers, with a belated return option until December 31, 2024.
As Foreign Exchanges Are Banned In India, Is It Legal To Trade On These Exchanges?
Yes, it is legal to trade on these exchanges; however, in early 2024, the Indian government banned several major foreign crypto exchanges, including Binance and Kraken, for non-compliance with anti-money laundering (AML) regulations. This makes the said exchanges inaccessible in India, although you can access your previous trades in the said foreign exchanges.
