Profits of cryptocurrencies will be taxed at 30 percent starting April 1st. It is the highest tax bracket and the rate is the same as the income from the lottery. This will apply to all virtual digital assets (VDA) and its revenue, from Bitcoin to unusable tokens (NFT). For example, if an investor buys a cryptocurrency at a price of Rs 10,000 and sells it at a price of Rs 15,000, making a profit of Rs 5,000, they must pay a 30 per cent tax of Rs 1,500.
The Union Budget 2022-23 has proposed a 30 percent tax on cryptocurrency assets. A 1 per cent tax deduction at source (TDS) on virtual currency contributions in excess of Rs 10,000 per annum is also recommended.
Cryptocurrency investors, however, need to know a few rules to stay on the right side of the law in fiscal 2022-23.
If the investor suffers an overall loss with no income, no tax has to be paid after taking into account all cryptocurrency transactions that have been made for the year.
Similarly, investors will not be taxed if they have purchased a crypto asset that has increased significantly in value but has not yet sold it. Until they sell it and make a profit, their profits will not be taxed.
Losses incurred from one type of VDA cannot be deducted from profits from any transactions involving other VDAs when calculating taxes. This suggests that investors have to pay a 30 per cent tax for each profit they make and losses cannot be deducted from the final tax amount if different tokens are traded. So, when you make a profit on one token but lose on another, you are still obliged to pay a 30 percent tax on the profitable token.
On July 1, 2022, a 1 percent TDS will be implemented. This TDS will be deducted from the total value of the transaction, regardless of whether the investor makes a profit or a loss.
Professionals and those who own businesses will not be able to deduct gains or losses between their primary income and cryptocurrency earnings.