Tax Implications & How to save Tax on Sale of Bitcoin & Cry
From 1st April 2022, flat
30% tax has been levied on the sale of cryptos in India.
All crypto currencies,
including Bitcoin, Etherium, and other digital assets, as well as non-fiat
currencies (NFTs), are included in the definition of virtual digital assets,
which was established in Budget 2022.
·
Income Tax on
Sale Of Crypto
Gains from all Virtual
Digital Assets are subject to a fixed rate of 30% tax, therefore gains from
crypto currencies like Bitcoin, Etherium and likewise are also subject to this
rate. Additionally, income would be taxed under the heading Other Sources and
not as Capital Gains.
The sale of any crypto
currency may result in losses, and those losses may not be offset by crypto
gains or gain from any other form of income, including business income, capital
gains, etc., but losses from other sources can be set-off with Crypto gains. Even
carrying over crypto losses to the following year would not be permitted.
Let’s say I trade in bitcoins
and make a profit of Rs. 7,00,000 in the month of June, but I lose Rs. 4,00,000
when I sell another bitcoin deal in the month of July. As a result, I only actually
gain Rs. 3 lakh. However, my income will be counted as Rs. 7 Lakhs rather than
Rs. 3 Lakh for income tax purposes, and a 30% tax will be added to that amount.
The tax owed in this instance would be 30% of 7 Lakhs, or Rs. 2.10 Lakhs. To Sum
up, a loss on the sale of one crypto currency cannot even be offset by a gain
on the sale of another.
·
TDS on Sale Of
Crypto
Many people traded in
cryptocurrencies without paying taxes on their earnings. The government has
instituted TDS on such transactions to ensure that there is no tax avoidance. Tax
Deducted at Source, or TDS, of 1%, will also be applied starting on April 1,
2022, on the sale of any virtual digital assets such as NFTs and
cryptocurrencies. It would be necessary to deduct this 1% TDS in accordance
with Section 194S from the Sale Price rather than the Capital Gain.
The person would be
entitled to claim credit for this 1% TDS that has already been deducted while
filing the ITR.
Regardless of whether the crypto
currency is sold for a profit or a loss, this TDS will still be applicable.
Although this may block working capital, particularly for active dealers, it
will also guarantee that the government has all the information and can simply
find out tax evaders.
The aforementioned taxes
would be assessed when an asset was sold rather than when money was taken out
of a bank account. As a result, tax would still need to be paid in the year in
which crypto currency was sold rather than the year the money was withdrawn
from bank account if a person sold their crypto currency but did not withdraw
the proceeds from bank account.
Even if someone exchanged
one cryptocurrency for another, this would still be regarded as a sale and a
bartering transaction. Despite the fact that INR has not been received in this
instance, but Crypto has been sold, it would be regarded as a case of sale. Even
if the cryptocurrency is sold on a foreign exchange, the same rule would still
be in effect. Everyone who resides in India is subject to this regulation,
although NRIs, entities outside India, and sale of cryptocurrency by foreign
entities are exempt.
·
GST on Crypto
The GST
Regulations do not currently provide a particular provision for virtual assets.
According to sources, the GST Council has established a committee that will
shortly discuss the idea to impose 28% GST on all crypto-related goods and
services. In addition to the current tax of 30%, this would be charged.
The government is working to clarify the application of the goods and services
tax (GST) on cryptocurrency assets soon after taxing the income from virtual
digital assets. However, the government has not yet imposed GST on
cryptocurrency transactions.
Saving of Taxes on Sale Of Crypto:
In India,
there is harsh taxation on cryptocurrencies, NFTs, and other Virtual Digital
Assets. The tax laws are much stricter because losses and costs cannot be
offset. Everyone who resides in India is subject to this rule, however NRIs and
businesses registered outside of India are exempt.
Without the
requirement to live in Dubai, entities can be founded there from India. Many
active Indian cryptocurrency dealers have started registering entities outside
of India in tax havens like Dubai while residing in India where there are no
taxes in order to avoid paying such punitive taxes. They conduct business
through their foreign firms, and no tax is levied in India.
