Do You Have to Pay Taxes on Cryptocurrency in India?
Cryptocurrencies such as Bitcoin, Ethereum, and other altcoins are digital currencies that are based on blockchain technology. If you are looking to invest in crypto, you need to understand various aspects of it. How taxation on cryptocurrencies works is one such aspect that you need to be aware of.
Government authorities around the world are considering setting rules on how to tax cryptocurrencies. So, it is unlikely you will escape paying taxes on your profits from crypto.
In 2018, the Reserve Bank of India issued a circular to banks and financial institutions asking them to not facilitate crypto transactions. After that, in 2020, the Supreme Court of India overruled it and permitted the trading of cryptocurrencies. But it hasn’t gained legal tender yet. That doesn’t imply they will spare you from paying taxes on crypto trades.
As per the Income Tax Law, 1961 of India, there are no specific guidelines about taxation on cryptocurrency. But taxpayers need to report any crypto transactions, and any profit gained from such investments.
The lack of any law regarding cryptocurrencies in the country means there is a lot of ambiguity about the rules and regulations for cryptocurrencies and their trade.
When you hold crypto for more than 36 months, it is categorized as a long-term capital gain. While any gains for a period shorter than that are classified as a short-term capital gains. And accordingly, these gains are taxable at different rates. Long-term gains are taxable at a rate of 20%, while short-term gains are subject to tax at the applicable personal rate.
Final Thoughts
There are no guidelines regulating cryptocurrency and their trade in India at the moment. The upcoming crypto bill might have some solid pointers. But one isn’t exempted from paying tax on their cryptos. Owning and trading rules for crypto might get there in time, but one needs to pay tax on it even now.
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