By this point, taxes on digital assets are unavoidable.
While crypto taxes in India had mixed reactions, it is what it is now: We’re liable to pay taxes on our crypto trades.
Cryptos and NFTs are both stuck in limbo in India—neither illegal nor strictly legal. And this is something that has been in debate for more than 4 years now.
However, NFTs right now haven’t really attracted as much attention as cryptocurrencies, even though they fall under the same category of “digital assets.” And because of this, NFTs face the same level of uncertain legal existence as cryptos.
Although the authorities have tried to devise different approaches toward digital assets, there’s still a lack of clarity among people about whether they are supposed to pay taxes on their crypto trades or not. Spoiler: You do!
Let’s talk about it!
“Crypto assets, not cryptocurrency.” – A recap
Cryptocurrency and crypto assets pretty much go hand in hand. And since they do, it’s easy to confuse the two with each other.
When you talk about assets, it’s a no-brainer that these assets are owned by somebody who considers them an entity of “value.” From paying debts to meeting commitments, assets offer you the opportunity to diversify your portfolio.
In the same way, currency refers to the legal tender that’s owned and controlled by the government. Your products and services are bought using this currency.
While the government is still trying to contemplate where it really stands on such matters, it has implemented a tax regime that aims at taxing your crypto gains or income from virtual digital assets like NFTs and similar tokens.
This means that there is now a 30% or higher surcharge on the transfer of any virtual digital assets, such as Bitcoin or Ethereum.
However, the TDS can also be adjusted against the total income tax payable toward the end of the financial year.
The need to deduct 1% TDS applies irrespective of whether the consideration is in cash or partly in cash.
Gifts in crypto
If you’re gifting cryptos as a gift, they are taxable as well under the “virtual digital assets” provision mentioned in the budget.
The gifts paid in the form of digital assets are exempt from taxes only if the value of the gift doesn’t exceed ₹50,000 during the financial year.
The regulatory effect
A few months back, some more players started entering the crypto regime, proposing different reforms that could change the trajectory of the entire industry.
International Monetary Fund (IMF) stepped in to call for the regulation of the entire crypto asset market.
Because of its mainstream presence now, crypto assets are inviting regulations from the IMF.
From a broader perspective, this is one of those things that could be welcoming the entire crypto industry into the mainstream in the near future.
Most importantly, the recent G20 summit also threw a bright spotlight on cryptos, precisely focusing on the problems with the self-regulation of the industry *coughs in FTX collapse*.
Here’s the thing – the crypto industry consists of a strong potential and it could be a major breakthrough for the technological and economical aspects of our regular lives. BUT, there’s always the threat of bad actors and a lack of knowledge among people that makes the entire industry unapproachable to a common person, at least for now.
“So does taxation mean legality?”
The introduction of taxes doesn’t really mean that cryptos are automatically legal in India. Rather, it’s an attempt to regulate virtual assets in the country. The bigger picture is something that will unfold in the future.
When you talk about crypto taxes, who better to ask than we at KoinX – the simplest crypto tax platform?
At KoinX, we allow you to integrate your preferred exchange with our platform and calculate your taxes in real-time. This report is downloadable and reaches you on demand.
We also have a full-fledged guide on crypto taxation that you can download right away.
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