How Do You Report Crypto Taxes in India? | 8 Easy Steps

Crypto Taxation in India

Crypto taxation in India is a complex subject that requires careful understanding and compliance. The Indian government has established guidelines and regulations to govern the taxation of crypto and related transactions.

Income generated from the sale, exchange, or use of crypto assets is subject to taxation at a rate of 30%, along with applicable surcharges and a 4% cess. These profits are taxed under Section 115BBH, and long-term capital gains have no lower tax rates.

Deductions are limited to the cost of acquisition, and no other deductions are permitted. Additionally, a Tax Deducted at Source (TDS) of 1% is applicable on the transfer of Virtual Digital Assets (VDAs).

It is important to report gains from crypto assets under Schedule VDA in the Income Tax Return (ITR) for the relevant financial year. Non-compliance or tax evasion can lead to penalties, fines, and potential imprisonment.

To navigate crypto taxation effectively, individuals should stay updated on the latest tax laws, seek expert advice if needed, and utilize resources provided by reputable platforms or tax professionals. By ensuring compliance with the regulations, individuals can fulfill their tax obligations and operate within the legal framework in India.

Read More: Guide to Crypto Tax in India 2023

1% TDS on crypto assets

As per the updated Income Tax regulations, starting from July 1, 2022, a Tax Deducted at Source (TDS) rate of 1% applies to all crypto asset sales and NFTs. If the income tax liability is lower than the amount deducted as TDS, individuals can claim a refund for the excess amount when filing their Income Tax Return (ITR) for the corresponding financial year. This provision allows for the adjustment of TDS deductions based on the actual tax liability, ensuring a fair and accurate assessment of taxes.

Key Takeaways:

In accordance with the latest announcements regarding crypto taxation in India, any profits generated or to be generated from the below-mentioned transactions are subject to a tax rate of 30%. It is important to note that this tax rate aligns with India’s highest income tax bracket. Therefore, individuals should be aware of the tax implications and ensure proper reporting and compliance when it comes to the profits obtained from such crypto transactions.

• Conversion of any digital assets to INR or any other fiat currency.
• Conversion of one virtual digital asset type to another may include crypto-to-crypto trading or trading in stablecoins.
• Paying for goods and services using a virtual digital asset.

Step by Step guide to File Crypto Taxes this Season(2023) with #EffortlessCryptoTax with CoinDCX

KoinX is an automated tax calculation and portfolio insights platform, where users can seamlessly integrate multiple exchanges, and wallets, enabling crypto investors to track all their crypto transactions, including NFTs and DeFi investments, in real-time.

How to get your Crypto Tax report in 2 minutes

To make an #EffortlessCryptoTax with CoinDCX, below are the steps to follow:

Step 1: Log in to your CoinDCX Account and click on your Account

Step 2: Choose the ‘Tax Report with KoinX‘

Step 3: Click on View Taxes FY 2022 – 23

Step 4: Click on Continue

Step 5: Once the tax amount is generated, click on ‘Reveal my Tax Amount‘

Step 6: To download your Tax report, click on ‘Download Tax Report @ 699‘

Step 7: CLick on ‘View Tax Report‘

Step 8: Receive your Tax report on your registered email id.

Things Investors should keep in mind.

Taxes on crypto gifts & donations

Gifts given in the form of virtual assets, including crypto or NFTs, are also subject to taxation in India. In such cases, the recipient of the gift is responsible for paying income tax at a flat rate of 30%, along with any applicable surcharge and cess. It is important for individuals who are gifting virtual assets to friends or family in India to be aware of this tax obligation. By understanding and complying with the tax regulations, both the gift giver and recipient can ensure adherence to the tax laws related to virtual asset gifts in the country.

Example: A received ETH worth INR 5000 from B on July 5. Since gifting falls under the income tax bracket, the INR 5000 will fall under A’s yearly income. Thus, a 30% tax will be levied.

Taxes on Crypto Airdrops 

In a manner similar to how brands distribute samples to retail sellers to gather feedback on new products, airdrops in the crypto space serve a similar purpose. When new tokens or NFTs are introduced, a portion of them is airdropped to investors. As this is not a direct investment, it can be categorized into two parts. Firstly, the airdropped assets are subject to taxes under the category of “other incomes”. Subsequently, if investors hold onto these assets and generate profits from them, those profits will fall under the revised 30% crypto tax. This framework ensures that airdropped assets and any subsequent gains from holding them are appropriately accounted for and taxed according to the prevailing crypto taxation regulations.

Example: If you received 100 XYZ tokens on Feb 06, 2023. The value of 1 XYZ token is INR 10. The taxable income further is INR 1000.

Read more: Crypto Airdrops Taxes in India

Taxes on Mining Cryptos

Under the provisions of the crypto tax bill, it is important to understand that crypto mining as an activity is not directly taxable. However, it is vital to note that any crypto tokens received through mining should be reported as business income for tax purposes. In simpler terms, while the act of mining itself does not attract taxes, the earnings derived from mining in the form of crypto tokens should be treated as taxable business income. Adhering to these guidelines is crucial to ensure compliance with the tax regulations specific to crypto mining activities. It is essential to accurately report and account for the income generated from mining to fulfill tax obligations and meet the requirements outlined by the tax authorities.

Example: If you sold 0.25 BTC you mined when it was worth INR 19,000, you would owe capital gains tax on the profit that you made from it.

Taxes on DeFi Transactions

Upon careful examination, it becomes evident that DeFi taxes encompass a wide range of transactions within the decentralized finance ecosystem. These transactions include activities such as yield farming, crypto mining, crypto lending, and borrowing. Regarding crypto mining, taxation can be categorized into two forms.

Firstly, if you acquire crypto tokens through mining, any resulting gains will be subject to taxation as business income. This means that the profits derived from mining activities are treated as taxable income.

The second form of taxation applies when you hold the mined crypto and subsequently generate profits from its appreciation. In this case, a 30% tax is applicable to the realized gains when you eventually sell the asset.

Therefore, it is crucial to consider the tax implications associated with engaging in various DeFi activities, including mining and selling assets. By doing so, you can fulfill your tax obligations and ensure compliance with the relevant regulations. It is essential to stay informed about the tax requirements and seek professional advice to navigate the complex tax landscape of DeFi effectively.

Read On: How to Save Taxes on Crypto Gains

Taxes on Non-Fungible Tokens

When considering the tax implications of Non-Fungible Tokens (NFTs), it is crucial to have a clear understanding of how they are treated under the new tax laws. NFTs that fall under the category of Virtual Digital Assets are subject to taxation as per these regulations. Therefore, if you have acquired an NFT and subsequently generated profits from its sale, those profits will be liable to taxation. It is important to note that the tax liability may also include a surcharge and a 4% cess in addition to the base tax amount. By staying informed about these tax obligations, enthusiasts of NFTs can ensure compliance and fulfill their responsibilities in accordance with the relevant tax laws. It is recommended to consult with tax professionals or experts to navigate the complexities of NFT taxation effectively.

Additional Read: Effortless Crypto Tax Reports with CoinDCX & KoinX

FAQs