India Crypto Taxation 2023: Complete Guide to Understand All Your Questions
Cryptocurrency started back in 2010, and from then until 2022, the Indian government did not provide any clear instructions on how crypto taxation would be implemented.
Was There No Tax on Crypto from 2010 to 2022?
Many people believe that since the government did not regulate crypto back then, there was no need to pay taxes.
According to the Indian Income Tax Act, if you reside in India for 182 days or more in a year, your global income is taxable.
This means that even if you earned money through illegal means like kidnapping or other crimes, that income is still taxable.
So, if you have earned profits by trading cryptocurrencies, it is genuine income and therefore taxable.
What Changed After 2022 in Crypto Taxation?
In the 2022 Budget, the government clearly announced:
A flat 30% tax will be levied on crypto earnings, irrespective of the amount.
No slab rate benefits will be applicable.
Losses cannot be offset against profits, even if it’s within the same coin (e.g., BTC to BTC transactions).
Every transaction must be reported separately.
If you make a loss, it will be considered zero for tax purposes, and on the profit amount, you must pay 30% tax.
Does Crypto-to-Crypto Exchange Trigger Taxation?
As per the government rules, crypto-to-crypto transactions are also considered taxable events.
If you convert BTC to USDT or BTC to Ethereum, it is considered a transfer and is subject to tax.
It is not necessary to withdraw in INR to incur tax; simply changing the format of the crypto is considered a sale.
The Confusion Around TDS:
From July 1, 2022, the government introduced 1% TDS (Tax Deducted at Source).
If you are trading on an exchange that is FIU-Compliant, the exchange will automatically deduct the TDS.
But if you are doing P2P (Peer-to-Peer) transactions, it is your responsibility to deduct the TDS.
Practically, this is very challenging, because often, the other party may not share their PAN or Aadhaar card details.
Even if you deduct the 1% TDS, you may still receive a 20% notice if their PAN is not linked with Aadhaar, causing you legal complications.
Tax on Airdrops and Crypto Rewards:
If you receive crypto as an airdrop, and its purchase cost is ₹0, then the entire market value of that crypto is taxable at 30%.
For example, if you received ₹100 worth of crypto for free and you sell it, you have to pay 30% tax on ₹100, as the cost to acquire it was zero.
Salary Received in Crypto from a Foreign Company:
If you are working for a foreign company and receiving your salary in crypto, it will be considered under the Crypto Head.
This income cannot be shown under Salary Head or Business Head; it must be declared under Crypto Head with a flat 30% tax.
Futures & Options (F&O) Trading in Crypto:
As per Section 43(5) of the Income Tax Act, any trade that happens without delivery is considered speculative income.
This means 30% flat tax is applied, and no expense or offset can be claimed.
Unlike stock markets, crypto F&O trading is not recognized under SEBI, hence it remains purely speculative and does not get business expense benefits.
How to Deduct TDS in P2P Transactions:
In P2P transactions, if you are trading BTC for USDT, you need to calculate the market value of BTC on that day.
The buyer is responsible for deducting 1% TDS on the purchase value.
If BTC is being exchanged for USDT, the person purchasing BTC will deduct TDS based on BTC’s rate, and the person buying USDT will deduct based on USDT’s rate.
Income Tax Return Filing:
From April 1, 2023, the time for tax return filing will begin.
Make sure you download all your transaction history so that calculations are accurate.
Since 2022, the government has introduced strict regulations for crypto taxation.
A flat 30% tax is mandatory on all transactions, whether you are in profit or loss.
TDS compliance is now the trader’s responsibility, especially in P2P transactions.
