Have you invested in Cryptocurrency? Actually, Finance Minister Nirmala Sitharaman has announced 30 percent tax on profits from crypto in the budget presented on Tuesday. There is a heated discussion about this. It is being interpreted in different ways. To clear the confusion, we try to make you understand every aspect related to tax on crypto. Let’s start.
Is bitcoin a virtual digital asset?
The Finance Minister did not use the word cryptocurrency in his budget speech. He used the terms virtual digital asset. Since cryptocurrency is not issued by many central banks, it is not a currency in the eyes of the government. The term currency can be used for an asset that is issued by the central bank of a country. In this way all cryptocurrencies including bitcoin will come under the purview of virtual digital asset.
What is the difference between transfer and sale of virtual assets?
Cryptocurrencies pass through many hands. This is different from trading in shares, mutual funds and other similar regulated assets. Cryptocurrencies are not just bought and sold through exchanges. Sometimes crypto is exchanged between two people through their wallet. Lokesh Shah, partner, Saraf & Partners, said, “Transfer is a broad term. It also includes exchange. You have bitcoin and I have ethereum and we exchange coins.” It comes under the transfer definition from the tax point of view. That’s why the government has used the word transfer to bring all types of transfers under the tax net. On the other hand, normal cash or currency is involved in the sale of crypto coins. In the budget proposals, it has been said to impose tax on both types of transactions.
Do I have to pay tax if I only transfer coins between my wallets?
No, you don’t have to pay tax. But more clarification is needed on what the government means by transfer. “Transfer between your wallet is not a sale. It is like transferring money from one of our bank accounts to another bank account,” said chartered accountant and founder of NRP Capital. Transfer of coins from crypto exchanges to your wallet should also not be taxed if it is your investment and you are the account holder of the wallet. However, transferring it to a third party will attract tax.
What is the point of 1 per cent TDS if 30 per cent tax is to be paid?
The government has imposed TDS of 1 per cent because it wants to know who is selling and buying virtual assets like NFTs and cryptocurrencies. Crypto exchanges will deduct 1% tax, then give it to the government.
Read also: Budget 2022: TDS on crypto will give Rs 1000 crore income to the government
,