Budget 2022: #CryptoTax
Everything you need to know about 🇮🇳 Crypto Tax for FY 22-23
🧵 Covers:
⚡️Salary
⚡️Consultancy
⚡️Airdrops
⚡️Mining
⚡️Yield farming, Staking, Lending, Interest
⚡️Trading/Investing
⚡️Borrowing
⚡️NFT
⚡️QnA
@simplykashif @CryptooAdy @NischalShetty
Let's first recap the Tax sections:
Sec 115BBH: 30% Tax to be paid on
⭐ Profits made
⭐ on "Transfer"
⭐of Crypto/NFT
📒Profit = Sale price - Cost of Purchase
📒Transfer = Sale, Exchange or Surrender of Crypto/NFT
(2/17)
Section 194S:
⭐Buyer to deduct 1% TDS
⭐on amount of VDA purchased
⭐from "Resident" seller
📒 Resident = Stay in India for >181 days
📒Trading in Int'l exchange/DEX - No TDS (P2P - TDS applicable)
📒Transfer within own wallets - No TDS
📒TDS from 01/07/2022
(3/17)
Let's now analyse each Transaction:
1. Salary received in Crypto:
There are 2 tax events:
a. Receipt of Salary: Market value (MV) of Crypto on date of receipt taxable as Salary - SLAB RATES
b. Sale of Crypto: Tax at 30% on Profit = Sale price - MV
TDS at 1% by buyer
(4/17)
2. Consultancy charges received in Crypto:
There are 2 tax events:
a. Receipt of Crypto: MV of Crypto on date of receipt taxable as Business Income - SLAB RATES.
Expense deduction - Allowed
b. Sale of Crypto: Tax at 30% on Profit = Sale price - MV
TDS at 1% by buyer
(5/17)
3. Airdrop:
There are 2 tax events:
a. Receipt of Airdrop: Market value (MV) on date of receipt taxable as Other Income - SLAB RATES
b. Sale of Crypto: Tax at 30% on Profit = Sale price - MV
*If no MV on Airdrop date. Then pay Tax on Sale date
(6/17)
3. Gifts:
There are 2 tax events:
a. Receipt of Crypto from:
Blood relatives: Exempted
Others: Exempt up to Rs.50K in year (If crosses, full taxable at slab rates)
b. On Sale: 30% tax on Profit = Sale Price - Cost to previous owner/Amt taxed as Gift Income
(7/17)
4. Mining:
There are 2 tax events:
a. Receipt of reward: MV on date of receipt taxable as Business Income* - SLAB RATES
b. Sale of Crypto: 30% Tax on Profit = Sale price - MV
TDS @ 1% by buyer
*My view: Sec 115BBH - Not applicable. Expense can be claimed as deduction
(8/17)
5. Yield Farming/Staking/Lending/Interest Income:
There are 2 tax event:
a. Reward claimed*: MV taxable as Other Income - SLAB RATES
Expense for claiming income - allowed
b. Sale of Crypto: 30% Tax on Profit = Sale price - MV
*Disclose Income "after claiming"
(9/17)
6. Trading/Investing
✅ Tax at flat 30% + Surcharge + 4% Cess
⚠️ Tax "ONLY ON PROFITS"
✅ Deduction allowed only for "Purchase price"
⚠️ No deduction for Brokerage, Interest, Royalty etc.
🚨 Disclose in ITR as Capital Gains.
(9/16)
7. Borrowing:
Borrowing and repayment of Loan is NOT a Taxable event.
However, if Borrowed amount is used to trade and earn profit, Then tax payable on those profits as per Point 6 above.
⭐ If used smartly, You can HODL + cover small expenses using this technique :D
(10/16)
8. NFTs:
✅ Tax at flat 30% + Surcharge + 4% Cess
✅ Deduction allowed only for "Purchase price"
⚠️ Tax "ONLY ON PROFITS"
⚠️ No deduction for Brokerage, Royalty etc
🔴 NFT Creators & flippers: making a separate thread. Stay tuned :D
🚨 Disclose in ITR as Capital Gain
(11/16)
9. QnA: Answering some popular Questions.
a. Earned a profit of $1000 by trading, but wallet got hacked Should I pay tax?
- Unfortunately Yes, You will have to pay tax on profits at 30%
b. If I use DEX, Govt. won't find out?
- They can and will find out easily
(12/16)
c. Should I pay GST on NFT flipped/ Created?
- Ideally yes, A detailed thread coming up on that shortly.
d. I Transferred my crypto from Exchange to Metamask. Should i pay tax/TDS?
- No TDS/Tax applicable on transfer within own Wallets.
(13/16)
e. If I made a Loss in Bitcoin of Rs.500 and made a gain of Rs.1000 in Bitcoin. On what amount should I pay tax?
- Tax will be payable on Rs.1000 at 30%. Since Govt. is treating Crypto same as gambling, no deduction will be allowed.
This is solely my view.
(14/16)
General Note: Ensure you convert the Crypto Income into INR immediately and withdraw the Tax portion.
Just a risk mitigation measure :)
(15/16)
I have tried to cover all aspects of Tax for FY 22-23
Will make thread on,
✅ Preparing for next year
✅ Tax & GST for NFT Creators/Collectors.
This is not a substitute for legal advice. I am a CA Finalist and specializing in Taxation. If you found useful, Do share :)
(16/16)