Ready to cash out Bitcoin? Understand income tax rules on cryptocurrency in India

Since Donald Trump's victory in the US presidential elections on November 5, 2024, Bitcoin, the world's largest cryptocurrency, has risen more than 30%, reaching its highest point ever. Investors have significantly benefited from this boom. If you are invested heavily in Bitcoin and want to book profit from this biggest crypto asset, remember that taxes on virtual digital assets (VDAs) in India operate differently than those on more conventional investment products like equities and mutual funds.

Two separate kinds of taxes apply to cryptocurrency trading in India:

1)According to Section 115BBH of the Income Tax Act of 1961, investors are required to pay 1% TDS (tax deducted at source) when transferring cryptocurrency tokens, commonly referred to as virtual digital assets (VDAs).

2)You must pay a 30% flat tax on any earnings you generate from cryptocurrency transactions.

Flat 30% tax on profits

Since FY 2022-23, a flat 30% tax is levied on crypto gains, irrespective of your income bracket. Profits are taxed equally, with no differentiation between short-term and long-term gains. The new ITR forms now include Schedule - Virtual Digital Assets (VDA) for reporting crypto/NFT-related gains.

TDS at 1%

“A 1% TDS applies to transactions exceeding ₹10,000 (or ₹50,000 in specific cases) in a financial year. This is automatically deducted by the exchange during transactions, eliminating extra paperwork,” said Abhishek Soni, CEO and Co-founder Tax2win.

Losses cannot be offset

Losses incurred from the sale of cryptocurrencies cannot be offset against gains from other cryptocurrencies or any other form of income, and such unutilised losses cannot be carried forward to subsequent financial years.

Whether you’re a private investor, a trader, or simply receiving crypto as a gift, every transfer and transaction may be taxed. Additionally, crypto gifts, mining, staking rewards, and airdrops are taxable. No deduction is allowed except for the cost of acquisition, said Soni.

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Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.