Crypto Becomes Legal In India (All You Need To Know)
The festival for crypto fans in India is finally here.
Crypto has proven that it has a bright future!
February 1, 2022, has made a mark in crypto history. India is finally taking steps to legitimize the cryptocurrency industry. To a considerable extent, the Indian Government’s progressive approach has justified the industry for valid reasons. The Government is no longer thinking of banning crypto in India.
The Budget of 2022, which was presented in the Indian Parliament, has made it apparent that India is working to legitimize the cryptocurrency industry.
For beginners, India’s announcement of introducing a blockchain-based Digital Rupee is a game-changer.
Crypto fans have been waiting for answers on the legality and taxes of their investments for a long time. The financial bill of 2022 has answered a few questions in this regard.
Budget 2022 – Key Highlights
Here are some of the highlights from the 2022 budget that pertain to cryptocurrency:
Virtual Digital Assets
The term “virtual digital asset” has been defined clearly in Indian Budget 2022.
To put it simply, Crypto and Non-Fungible Tokens (NFT) are now acknowledged as virtual digital assets!
…”This is any information, code, number, or token (not being Indian or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account, including its use in any financial transaction or investment, but not limited to investment schemes…”
Virtual digital assets are taxed under Section 115BBH. The assessee is required to pay tax at a rate of 30% on any revenue derived from the transfer of any virtual digital asset.
There are no expenses that can be deducted from the income. To arrive at the net income, only the acquisition cost (buy price) can be deducted from the sale revenues.
Losses may not be set off or carried forward.
Gifting Virtual Assets Will Be Taxed
The Finance Minister of India, Nirmala Sitaraman, said that, aside from the acquisition cost, no other expenditure or allowance should be made for calculating such revenue. Furthermore, any loss incurred as a result of the transfer of digital assets cannot be offset against any other income. As a result, giving virtual assets as a gift will be taxed at the recipient’s expense.
Despite the ambiguity and confusion surrounding crypto assets and NFTs, the latter is making significant inroads and impacting every economy.
For example, WazirX, which Binance owns, announced last month that annual trade volume on its platform hit $43 billion in 2021, or a “1,735 percent” increase from 2020.
Tax on Transfer of Virtual Digital Assets
Every transaction involving the transfer of virtual digital assets is subject to a 1% tax imposed by the Indian government under section 194S. The person making the transfer payment (purchaser) will be the one who is responsible for paying the tax. However, there are a few things to keep in mind:
- To invoke the provisions of section 194S, consideration (in cash or kind) is required.
- If the purchaser of the virtual digital asset is not subject to a tax audit or does not have income from a business or profession (e.g., salaried individuals), the tax deduction of 1% will not apply if the total value of the consideration does not exceed 50,000 (fifty thousand rupees) during the financial year. The 50,000 limit is decreased to 10,000 if there is a tax audit or if income from a business or profession is offered for tax.
- More information about the forms, deadlines, and procedure for depositing the tax is awaited.
This clarification on crypto taxation would undoubtedly contribute to India’s much-needed acknowledgment of the crypto ecosystem. We also expect that this development eliminates ambiguity among banks and financial institutions, allowing them to provide financial services to the cryptocurrency business. While this is only the beginning, we are optimistic about the future.
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