In India, cryptocurrencies like Bitcoin and Ethereum are treated as digital assets, and the government has set specific tax rules for them. Every Indian compliant exchange, shares data with the Indian government and hence you get taxed. Although, there are some exchanges that you can use that don’t compliant with Indian government as of now like Bitget, Gate, MEXC, Lbank. Here’s what you need to know about how to calculate crypto taxes in India:
1. Income Tax on Cryptocurrency
When you sell or trade cryptocurrencies for a profit, that profit is considered income. You need to pay tax on that income based on the following rules:
- Short-Term Capital Gains (STCG): If you hold the cryptocurrency for less than 36 months, any profit you make is taxed at a rate of 15%.
- Long-Term Capital Gains (LTCG): If you hold the cryptocurrency for more than 36 months, any profit is taxed according to your income tax slab, which can range from 5% to 30% depending on your total annual income.
2. Tax on Mining Income
If you mine cryptocurrencies, the income you earn from mining is considered business income and is taxed according to your applicable income tax slab.
3. Goods and Services Tax (GST)
When you buy or sell cryptocurrencies, you may also have to pay a Goods and Services Tax (GST) of 18% on the transaction value, it is not clear but this something which is there.
4. Tax Deducted at Source (TDS)
From July 1, 2022, a 1% TDS is applicable on all cryptocurrency transactions. This means that when you sell or trade cryptocurrencies, 1% of the transaction amount will be deducted as tax. All Indian compliant exchanges are following this standard.
Here are some few international exchanges that let you buy crypto without TDS
Example of Cryptocurrency Tax Calculation
Let’s say you bought 1 Bitcoin (BTC) for ₹5,00,000 and later sold it for ₹10,00,000 after holding it for 6 months. Only in case you are buying or selling on any Indian law compliant exchange. Here’s how the tax calculation would work:
Step-by-Step Calculation on Cryptocurrency tax in India:
- Purchase Price:
- You bought 1 BTC for ₹5,00,000.
- Selling Price:
- You sold 1 BTC for ₹10,00,000.
- Profit Calculation:
- Profit = Selling Price – Purchase Price
- Profit = ₹10,00,000 – ₹5,00,000 = ₹5,00,000.
- Tax Rate:
- Since you held the BTC for 6 months, it falls under Short-Term Capital Gains (STCG), which is taxed at 15%.
- Tax Calculation:
- Tax = Profit × Tax Rate
- Tax = ₹5,00,000 × 15% = ₹75,000.
- TDS Calculation:
- You also have to deduct 1% TDS on the selling price.
- TDS = Selling Price × 1%
- TDS = ₹10,00,000 × 1% = ₹10,000.
Total Tax Liability
- Total Tax Payable:
- STCG Tax + TDS = ₹75,000 + ₹10,000 = ₹85,000.
Summary of the Crypto Tax Example
- Purchase Price: ₹5,00,000
- Selling Price: ₹10,00,000
- Profit: ₹5,00,000
- STCG Tax (15%): ₹75,000
- TDS (1%): ₹10,000
- Total Tax Liability: ₹85,000
Conclusion
Understanding India’s tax laws on cryptocurrencies is crucial for anyone involved in buying, selling, or trading digital assets. The laws can change, so it’s important to stay updated and consult with a tax professional if you have questions. Always keep track of your transactions and report your earnings to avoid penalties!
