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Tax Implication on Crypto Staking in India

tax on crypto staking
Similar to crypto mining, investors can earn an income via crypto staking. However, with the taxation involved in the gains from all digital assets and activities, staking falls relatively close to crypto trading tax compliances. Learn everything you want to about crypto staking from this in-depth guide on tax on crypto staking.

When the taxes on virtual digital assets were introduced in 2022 in India, most crypto stakers asked the same question – “Do I pay tax on crypto staking?”

Staking cryptos can unlock potential rewards. However, from April 01, 2022, rewards have been  taxable, meaning that if you stake cryptos, you need to understand the tax implications better in order to adhere to the tax compliances. 

This post is an in-depth explanation of all your questions about tax on crypto staking.

What is considered a staking gain?

Staking allows you to earn rewards in exchange for vouching for the correctness of transactions on an underlying blockchain network. While this may appear hard, ordinary users may typically do it straight from their digital wallets or use services provided by cryptocurrency exchanges that will handle the technical intricacies in exchange for a percentage of the revenues. 

How to calculate your crypto staking gain?

The percentage of return provided by a validator each year APR (Annual Percentage Rate) determines profits from staking. 

Assume you wish to stake 100 “X” coins to a validator that offers a 10% APR. Every year, you will receive 10% interest on your asset. This means that after one year, your net asset will be 100+(100×10%)= 110. That implies you’ll receive  10÷365= 0.027% interest every day or 10÷12= 0.833% interest per month.

Applicable tax clause for Crypto Staking

Staking awards are taxed at the fair market value of the coins when you receive them. You’ll also have to pay Capital Gains Tax when you sell, trade, or spend your staked coins, just as you would with any other cryptocurrency. 

Staking Income will be taxed as Other Income at applicable Income tax slab rates. When the crypto asset is sold, Capital Gains Tax will be levied. In other words, most investors will pay Income Tax upon receipt and Flat 30% tax on any subsequent gains.

Most times, moving your coins to a staking pool or a wallet doesn’t attract taxes. An asset transfer between wallets usually is tax-free. However, the gas fee involved is taxable separately.

Real-life scenario(s) of tax computation on crypto staking

An individual participates in a crypto staking program where he earns $10,000 in staking rewards. The individual would need to pay taxes on their staking income of $10,000, based on their tax bracket.

Also Read: How to stake Ethereum 

Some ambiguities about tax on Crypto Staking

  • Is the income from staking taxable? Virtual currency transactions, including those involving staking, are taxable by law. This means that any income you receive from staking may be subject to tax.
  • How is the income from staking taxed? Staking income is taxable as ordinary income on receipt.
  • Staked units (through block rewards and transaction fees) are taxed at the time of receipt.

As long as you hold cryptocurrency as an investment, you normally do not owe taxes on it until you sell it. 

KoinX is an effective taxation tool that could help you understand all your crypto-related compliances. Not only is it a really efficient tool but also gives you a comprehensive outlook of your crypto portfolio – even including your penny transactions. Start calculating your crypto taxes with KoinX.