An Introduction To Crypto Taxation In India

Crypto Taxation

This blog is going to provide you with information on different cryptocurrency taxation in India. If you are looking for new opportunities but aren’t sure what to do next, this article is going to help guide you through the decision process.

Rules Of Taxation In India

There are three types of tax jurisdiction in India: central, state and local jurisdiction taxes. Central taxes are levied by the Indian government and generally apply across all tax zones; state taxes exist exclusively within that particular state; local taxation typically applies within each city or town in a particular country. In a similar vein, cryptocurrencies are deemed as commodities under Section 2(43) of the Income Tax Act (1961). This means that virtual currency would be applicable to the commodity section while trading and mining is defined as a service. Thus, capital gains tax would only apply if you trade in cryptocurrency or mine it, while services tax would not apply. In this article, we will focus on tax on cryptocurrency in India which is governed by the Goods & Services Tax (GST) Act as well as Indian Tax law.

Cryptocurrency taxation in India

The taxation on crypto depends upon your gain/loss and the source of the crypto, based on this condition crypto tax is charged. So, do you have to pay tax on crypto the simplest answer for this question is Yes. Now let’s have a look at the cryptocurrency taxation in India . The Goods And Service Tax Act (GST) treats cryptocurrency differently than fiat currency. It applies a 12% tax rate to both cryptocurrencies and digital assets. This rate applies even if you trade or mine. GST is also applicable to all payments in cryptocurrency, whether for remittances, purchases or sales of goods or services. However, any cryptocurrency that is mined through exchange or mining would be subject to the 1% Goods and Services Tax (GST) rate. This article will provide a high level overview about crypto taxation in India.

Income Tax:

Income tax is levied at the individual level and applies to individuals who are non-resident Indians and foreign nationals as well. Income Tax Rates In India:

Under section 114A of the Income Tax Act, in case of income other than income from salary, interest or dividend (which are specifically provided for under the existing provisions of the Income Tax Act), any sum exceeding INR 2,50,000 is taxable. As such in case of crypto currency which is treated as a capital asset and gains arising from it are also taxed upon accrual, the gains would be taxable at the same rate as per your slab.

Capital Gains:

If you purchase cryptocurrencies as an investment, capital gains will be taxable as per Section 53 (1) and (2) of the Income Tax Act. The basic exemption is Rs 2 lakh per annum. However, if you have purchased cryptocurrencies for trading or investment purposes and it can be reasonably inferred that such cryptocurrencies were purchased for speculative or commercial purposes, then capital gains are taxed at the rate of 10%. In case you purchased cryptocurrency through a digital wallet, the gains will be calculated in the same manner as above.

Rules For Taxation On Mining 

In case of crypto mining using a personal computer, the tax will be levied on the gains made from the sale of cryptocurrency. This means that you must keep track of your mined coins and accurately record your income before filing your tax on cryptocurrency in India.

If you have understood the taxation on crypto in India and are looking for methods to file your taxes then, you should use Binocs to file your crypto taxes. Binocs is a leading service provider which provides automatic tax calculation and filing without any delay.

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