Although we’ve gotten used to taxes against our crypto holdings, there are still some situations where we don’t have absolute clarity. One of these situations is drawing salaries against your crypto portfolio.
India has certain tax brackets for crypto trades, staking, or NFT trading. But what about tax on crypto salary? Does that exist? To understand that, we need to understand how crypto salaries work.
What is considered a Monthly Crypto Salary?
Let’s look at it this way – A salary is a ‘fixed’ account credit that you are liable to receive every month. Out of the different modes of receiving payments, an uncommon method is receiving salaries in your crypto portfolios.
If you’re already aware of the existing tax on crypto-related activities, you know liable to pay taxes on your crypto holdings.
This means, your answer is that receiving a monthly salary from your crypto-related activities is very well taxable in India. The respective salary isn’t just taxable at the crypto forefront but also puts you in the taxable salary slabs in India.
Is drawing a Monthly Crypto Salary taxable?
Since you are receiving the crypto salary, it gets deposited into your portfolio which you’ve to transfer into your bank.
Now whether you take this amount into your bank or use it in peer-to-peer transactions, it’s still taxable in India.
In fact, the following actions are taxable as well:
- Purchasing more crypto using INR or any other fiat cash.
- Buying goods and services using cryptocurrency.
- Trading stablecoins or other cryptos.
Applicable raw tax clause on Monthly Crypto Salary
The introduction of Section 115BBH in the 2022 budget levies a 30% tax on profits made by trading cryptocurrencies from April 01, 2022. The 194S section also levies a 1% Tax at source on the transfer of crypto assets from July 01, 2022, if the transactions exceed ₹50,000 (even ₹10,000 in some cases) in the same FY.
This tax rate applies to private investors, commercial crypto traders as well as anybody who transferred digital assets in a particular financial year. This tax rate also applies irrespective of the nature of income for the investor and doesn’t recognize any difference between short-term or long-term gains.
Some Ambiguities about Tax on Crypto Salary
There are a number of ambiguities surrounding the taxation of cryptocurrency salaries. Here are some of the most common ones:
- Valuation: Cryptocurrency is highly volatile, making it difficult to determine its value for tax purposes.
- Jurisdiction: The taxation of cryptocurrency can vary depending on the country or jurisdiction in which an individual is located, adding another layer of ambiguity to the process.
- Record-keeping: Employees receiving cryptocurrency as a form of salary may have difficulty keeping track of the value of their holdings, making it difficult to accurately report their income for tax purposes.
Ways to reduce Tax on Monthly Crypto Salary
There are several strategies that you can leverage to reduce your tax liability on cryptocurrency salaries:
- Expense deductions: You can potentially lower your taxable income by deducting any business expenses you incur while earning your cryptocurrency salaries, such as equipment and supplies, internet costs, and home office expenses.
- Tax planning: Working with a tax professional to develop a tax planning strategy that takes into account the unique characteristics of cryptocurrency salary income may help you to minimize your tax liability.
Well, it might seem complicated but indeed, tax doesn’t always have to be difficult.
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