Income Tax on Cryptocurrency


Over 10 crore people, or 7.30% of India’s total population, are projected to own bitcoin. In today’s digital currency market, approximately 1,500 virtual currencies are traded, including Bitcoin, Ethereum, Litecoin, Dogecoin, Ripple, Matic, and many others.

Profit from the sale of virtual digital assets such as cryptocurrency and NFTs would be subject to a flat 30% tax, according to the Union Budget 2022.

On payments made for the transfer of digital assets, a 1% TDS will also be applied.

Gains from the transfer of digital assets like Ethereum, Bitcoin, and other cryptocurrencies are taxed at a flat rate of 30%, with no deductions allowed except for the cost of purchase. In addition to the tax, the individual will be required to pay a 4% cess.

Regardless of whether the benefit is short-term or long-term, the individual who has profited from cryptocurrency transactions must pay the tax. Moreover, except for the cost of acquisition, which is the purchase price, the government would not allow other costs such as platform fees, broker fees, or internet charges to be subtracted as expenses from the profit. Even if the individuals’ total income is less than 2.5 lakhs, such income will be taxable.

Example of Calculation of tax on Crypto:

Suppose Mr Wazir purchased Bitcoin of 40,000 INR and sold the same for 70,000 INR

Here the Profit is: 30,000 INR

Tax: 9000 INR

Cess: 4% at 9000 = 360 INR

Total tax liability: 9360/- INR

This is why crypto taxation is being interpreted as

“Your gain becomes our gain, and your loss becomes your loss”

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