Cryptocurrency has gained significant popularity in recent years, with more people investing and trading in digital assets. As the cryptocurrency market grows, it becomes crucial to understand the taxation rules and regulations surrounding these transactions, particularly in India.
Introducing Tax Ninja's Cryptocurrency Tax Calculator, an online tool designed to help you calculate the tax on your crypto gains. Simply enter the purchase price and sale price of your crypto assets, and the calculator will determine your gains and the corresponding income tax you'll need to pay.
Q What is Cryptocurrency?
A Cryptocurrency, also known as digital currency or virtual currency, is a form of digital or virtual asset that uses cryptography for security. It is designed to work as a medium of exchange, just like traditional currencies such as the Indian Rupees or US dollar, but it exists purely in digital form.
Cryptocurrencies leverage blockchain technology, which is a decentralized and distributed ledger system, to secure transactions and control the creation of new units.
Q What is a virtual digital asset?
A A new clause (clause 47A) has been inserted under Section 2 of the Income-tax Act, 1961 to define Virtual Digital Asset.
The definition, put in a simpler terms, refers Virtual Digital Asset to something that represents value and can be exchanged online. It can be information, code, a number, or a token. It may have its own value or be used as a form of payment. This includes things like Cryptocurrencies, special tokens like NFTs, and any other digital assets specified by the government.
Q How are cryptocurrencies taxed in India?
A In the 2022 budget, the finance minister introduced new regulations regarding the taxation of cryptocurrency transactions. Previously, cryptocurrency transactions were subject to taxation but lacked proper regulation. However, starting from the financial year 2022-23, all transactions involving cryptocurrencies must be reported and are taxed at a rate of 30% (plus a 4% surcharge) as per Section 115BBH.
This applies regardless of whether the income is classified as capital gains or business income.
In addition to the aforementioned taxes, a 1% tax deduction at source (TDS) is applied to the sale of crypto assets exceeding Rs 50,000 (or Rs 10,000 in certain cases) u/s 194S.
Q Can I claim other expenses apart from purchase cost?
A No, you cannot claim any other expenses or allowances related to crypto activities, except for the acquisition cost or purchase cost.
Q Can I set off the loss incurred in cryptocurrency?
A No, you cannot set off your losses in cryptocurrency against any other income, including gains from cryptocurrency. Additionally, it is not possible to carry forward the losses.
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