Budget 2022 announced a shocking addition to India’s Income Tax regulations, specifically meant for all crypto investors—a staggering 30% flat tax on all crypto income. This tax is applicable for your crypto gains in the current year, starting April 2022. 

The 30% flat rate as the crypto tax was placed on all virtual digital assets, comprising NFTs, cryptos, etc. However, this was just the beginning of it. The government announced all the regulations associated with crypto taxes highlighted below.

Crypto Tax in India: Highlights

  • A straightforward 30% income tax applies to profits from all digital assets, including cryptos and NFTs.
  • Typically, individuals are exempt from tax if they have an income of less than Rs. 2,50,000 in a year. This exemption does not allow gains from crypto. Even if your profits are less than Rs. 2,50,000, you will have to pay tax at 30%.
  • Surcharge and cess at 4% of the tax amount are applicable in addition to the 30% crypto tax.
  • 1% transaction fee in the form of TDS (Tax Deducted at Source) will be levied on all digital asset transactions. So, from April 2022 onwards, you will have to pay 1% of the amount every time you buy or sell crypto.
  • If you have held a crypto asset for more than 5 years or indulge in regular crypto trading, the same tax will apply. There is no benefit for long-term crypto investments.
  • If you make a loss while crypto trading, you cannot reduce this loss (set off the loss) with your other income during the year.
  • If you made a loss this year but made a profit with crypto trading next year, you cannot offset the losses you incurred last year with the current year’s profits.
  • You can, however, reduce the losses against one crypto asset with the profits of another crypto asset within the same year. So, for example, if the price of crypto fell but your NFT performed well, you can reduce the gains from the NFT by the loss from the cryptos and pay taxes on the final reduced amount.
  • You cannot reduce any expenses incurred while trading crypto. For example, suppose you’ve bought equipment for crypto trading or spent a considerable amount of transaction fees to make crypto profits. In that case, you cannot reduce these expenses from your crypto profits.
  • You can give crypto to close relatives without paying crypto tax on it. You can also give crypto to someone for their wedding, and it won’t be taxable. However, if you are gifting crypto to anyone else, only transactions of less than Rs. 50,000 worth of crypto will not attract crypto tax.

So,How to File Crypto Tax in India in 2022?

For the crypto income earned in FY 2021-22 (between April 01, 2021, to March 31, 2022), you will have to file your taxes in the current year. This is because the government has not released the Income Tax Forms yet, and neither is there any announcement on how individuals should disclose their income earned in the previous financial year. 

However, some key elements in filing crypto taxes for both years remain common:

1. You need a detailed list of every crypto transaction you made

To ascertain the profits, you will need to collate the details of all transactions that you have made. While this may be easy if you use an excellent crypto exchange, decentralised exchanges make it hard to keep track of such transactions. Therefore, it becomes imperative to disclose crypto income adequately to avoid any discrepancies.

2. Exchanging currencies also attracts tax

Crypto tax is not just applicable when you use INR to purchase Bitcoin or sell Bitcoin for INR. Even if you have sold Bitcoin for Polygon, the transaction would still attract a tax levy.

3. Keep in mind the rules before disclosing income tax

Since you cannot deduct expenses from your profits, your crypto income will be calculated without reducing the transaction fees. However, if you have paid a TDS of 1% while trading crypto in the current year, you might still be able to reduce this amount from your tax.

Concluding Thoughts

While you may feel the need to approach a professional to help you file your crypto taxes, it would be beneficial to learn a bit about it yourself. The knowledge will help you plan your taxes better.

Filing crypto taxes can be complicated, especially because of the prevailing ambiguity. However, Crypto exchanges like ZebPay makes it extremely easy to keep track of your crypto transactions, thereby simplifying your tax filing process. So start trading on ZebPay today!