Taxation on Crypto in India: Budget 2022

In Budget 2022, the Hon’ble Finance Minister Mrs. Nirmala Sitharaman has announced revolutionary changes to the virtual asset class. For the first time, the government has officially termed digital assets including crypto assets under “Virtual Digital Assets”. The government has announced a flat 30% income tax rate on the transfer of “crypto-assets” in the proposed tax regime. This is a major step by the government in providing clarity to investors and entrepreneurs transacting in digital assets in India and is a step in the right direction towards regulating the crypto industry.

So what will be the impact of these new policies on the crypto market?

The flat income tax rate is applicable to retail investors, traders, or anyone transferring crypto assets in a given financial year with no distinctions between short-term and long-term gains. 30% tax rate will be levied on any profits made from the transfer of virtual assets.

The TDS of 1% has been introduced to capture the transaction details and keep a track of investments being made in crypto assets. So, every time you purchase a crypto asset (subject to a certain threshold), you are liable to deduct 1% TDS of the transaction amount in the financial year.

Although there are specific questions that require more clarity on the proposed tax regime on virtual assets in India, the government has taken a progressive step further to provide transparency in recognizing crypto assets. The next step in embracing the industry should be to regulate the industry through a crypto bill for further clarity to investors and entrepreneurs.

Read more: Guide to Crypto Tax in India 2022