In the Union Budget presented in Parliament on Tuesday, Finance Minister Nirmala Sitharaman announced a 30 percent tax on profits from the sale of digital assets like NFT and Cryptocurrencies.
Earnings from cryptocurrencies will now be taxed at 30%. Moreover, a TDS of 1% will also be applicable on transactions of cryptocurrencies. The Finance Minister clarified that the digital currency issued by the RBI (CBDC) will be considered as digital currency, while cryptocurrencies like Bitcoin and Ethereum will be considered as assets and the income earned from it will be taxed. Finance Minister Nirmala Sitharaman, in her budget speech, said,
“There has been an increase in transactions in virtual digital assets. Due to this, a special tax system has become necessary for virtual digital assets. Now income earned through the transfer of any virtual digital asset will be taxed at the rate of 30%.”
Notably, many countries are trying to tax the crypto market, but India has become the first country to declare specific tax for the asset class. The government has already raised concerns about terror funding from crypto. The Indian government seems to have taken the path of trying to discourage the investors. It has been said to levy tax at the rate of 30 percent, which is equal to the tax on lotteries, game shows etc.
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Now let’s understand tax mathematics:
- Let’s assume you have invested INR 10 lakh in crypto and you got 50% i.e. INR 500000 profit on your investment in crypto. Now, the government has decided to impose a 30% tax on the earnings from crypto. Now, on a profit of INR 500000, you will have to pay a tax of INR 150000.
- In another case, if you have gifted cryptocurrency, let’s assume, worth INR 5 lakh to your wife. The government has made a provision of 30% tax on the gift of cryptocurrencies. Now, your wife has to pay INR 150000 as tax.
- Moreover, transactions done with cryptocurrency will attract 1% TDS. The government wants to keep an eye on crypto transactions with TDS.
Is it all bad?
Even though the government has foisted a huge tax on virtual assets, the market is perceiving it positively. This move of the government has at least cleared the air that the government is not going to put a blanket ban on cryptocurrencies. Now, picture will further be clearer once the Cryptocurrency bill comes before parliament.
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