In India, undisclosed crypto gains and income are subject to a 70% penalty tax. It is not the standard rate of 30%, which is the ordinary rate.
The amount is calculated in the same way as the total profit from all crypto activities, regardless of losses.
How is Tax Calculated?
The tax is calculated based on unreported crypto income (whether personal income or capital gains).
The amount of tax liability is the same as the ordinary rule, i.e., 30% on the profits generated, irrespective of the amount of losses in that financial year.
For example, if you have gained Rs. 5000 crypto gains in 2023 when the 30% law was in effect, you have a tax liability of Rs. 1500 in ordinary cases. However, since the income is undisclosed and unreported, the tax liability comes to Rs. 3500, i.e., 70% of the total crypto income.
Is it the Standard Rate?
No, this is not the standard rate. It is the penalty rate. The standard rate is 30% plus a cess of 4% as per Section 115BBH of the Indian Income Tax Act. The penalty is 70% under Section 158B of the same act.
How do I know if I have a tax liability?
You can easily check your tax filings for the previous and current years. If you have filed the data correctly, you might as well have already paid the taxes. However, if you have not filed the data, you are required to file it at the earliest and calculate your taxes based on the amount of transactions.
Each Indian crypto exchange and all FIU-registered foreign crypto exchanges have a section in your profile under which you will get various data related to how many trades you have made, your net gains, and losses.
Frequently Asked Questions
How to show VDA in ITR?
You can show VDA in the ITR by using the relevant module on the Income Tax website or in the Income Tax Return software.
How to avoid 30% tax on crypto in India?
To legally avoid crypto income tax in India, transfer your crypto to a foreign bank account, then transfer the funds to India. But you will still have to declare income from foreign sources.
Why is crypto so heavily taxed in India?
The Indian government wants to discourage crypto trading in the country because the RBI and the Ministry of Finance consider it a risk to individual traders and investors.
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
