Cryptocurrency Tax Calculator

The Income Tax department added a new Section 115BBH to tax any income derived from the transfer of cryptocurrency and other virtual digital assets (VDAs), such as metaverse tokens and NFTs, has been imposed from April 1, 2022.

The new tax, as well as the anticipated 1% TDS on VDA transfers beginning July 1st, has taken the lustre off India’s thriving crypto markets for some while others are celebrating the decision as a step towards acceptance of crypto. 

As a result of these tax notifications, India’s major crypto exchanges have plunged and many Indian cryptocurrency exchanges and crypto businesses are relocating to destinations such as Dubai or Singapore which have a crypto-friendly tax regime. 

But does this mean that as investors,you can also do the same? What will be your tax liability and how can you set off your losses.. Let’s have a look at the rules of taxation on digital assets.

Tax Liability

  • Under Section 115BBH for taxation of persons whose sources of income include income from transfer of Virtual and Digitals Assets (VDAs) are liable to pay a flat 30% tax on the amount received from transfer or sale of digital assets including crypto and NFTs. Those who have received airdropped crypto tokens or NFTs as gifts will have to pay tax too.
  • So, the total tax liability of an individual invested in cryptocurrency or other VDAs will be the sum of income from transfer or transaction of such assets and the tax s/he would have paid on their regular sources of income.
  • You will have to pay tax only when you earn an income from a transaction, transfer or exchange or crypto or other virtual digital assets. No tax is to be paid for holding crypto
  • The taxation of gains arising on crypto assets is not limited to the tx slab as surcharge and cess are also charged over this 30%. The surcharge is applicable at the rate of 10%, 15%, 25% and 37% of the tax amount depending on the taxable income and cess is applicable @ 4% of the tax and surcharge amount. 

As a result, the gains from the transfer of Crypto assets can be subject to effective tax at the rate of 31.2%, 34.32%, 35.88%, 39% and 42.744% depending on the taxable income in case of individuals/HUFs.

  • Losses cannot be set off or carried forward. So,if you incur a loss from investments in crypto and a profit elsewhere, you cannot claim that you would pay a tax after deducting your losses (which is not a part of your income yet taxable). 

Calculation

For example, if the total taxable income of an assessee is Rs. 5,00,000, of which Rs. 1,00,000 is the income from income from transfer of VDA. 

Rs. 30,000 will be the amount of income tax on this (@30%), and Rs. 4,00,000 will be subject to other applicable slab rate, depending on the source of income.

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