Budget 2023: A year into the crypto income tax, and confusion reigns. Will FM provide more information?

Spread the love
14 / 100

The taxation framework for crypto assets, or virtual digital assets (VDAs), introduced by the government on April 1 has made investors and traders wary of this new asset.

 The government stated in the 2022-23 union budget that gains from crypto assets would be taxed at 30% regardless of the individual’s income tax slab rate. Furthermore, a 1% tax deducted at source (TDS) was imposed on the transfer of such assets.

 Priya Ratnam, a crypto investor, believes that many people who invest in cryptocurrency are already in the 30 percent tax bracket.

“The TDS is an issue for intraday and short-term traders who trade frequently.” If you transact more than 10-15 times, it freezes a significant amount of capital”, says Ratnam, CEO of Avisa Games Guild, a Web3 gaming guild.

Uninformed investor 

Millions of Indians have poured billions of rupees into crypto assets as a result of the meteoric rise in their value. According to CoinGecko, a digital currency price and data platform, bitcoin has returned 24,980 percent since 2013, while ether has returned 2,89,801 percent since 2015 according to certain crypto tax softwares.

Not only metros, but also tier-I and tier-II cities, have contributed significantly to the demand for crypto assets. Binocs, a platform that calculates and provides crypto tax reports, has approximately 60% of its customers from tier-II cities like Patna, Bhubaneshwar, Ranchi, Jaipur, and Mohali.

However, experts warn that even after eight months of crypto taxation, many people are still unaware of the rules.

Many people still believe that taxes apply only when they convert their cryptocurrency and withdraw it into their bank account.

Gaps in taxation

According to government regulations, events such as transferring or withdrawing cryptocurrency from one’s wallet and depositing it in the wallet of another are taxable. Furthermore, it is the buyer’s responsibility to report capital gains from cryptocurrency assets. Furthermore, rules require the buyer of a VDA to ensure that tax is deducted at the source at a rate of 1% of the sale consideration.

To make things easier for users, Indian crypto exchanges deduct TDS on all trades on their platform by default, whereas international exchanges do not.

Navigating Difficulties 

Then there’s the problem of computing and calculating tax amounts. Experts warn that because gains in one crypto asset cannot be offset against losses in another, investors should keep in mind that they must pay 30 percent tax on all capital gains.

The NRI factor 

There is also uncertainty regarding the chargeability of VDAs.

 Indian taxation is based on the principle of a person’s residence and source of income. Indian residents’ worldwide income is taxable in India. Non-residents, on the other hand, are subject to source-based taxation, which means that only amounts received or accrued, or deemed to accrue or arise in India, are taxable in India.

If you’re looking for a tool to manage your crypto capital gains tax and portfolio, Binocs will be a great fit for you and will teach you more about the crypto world.

Kevin Peter