Crypto tax: How cryptocurrencies are treated in India and around the globe

From being called speculative products to ‘virtual digital assets’ (VDAs), cryptocurrencies have come a long way. From April 1, India introduced a tax on all VDAs. The law states that any income earned from the transfer of digital assets would be taxed at 30 per cent with no deductions or exemptions. This would apply to the gifting of digital assets as well.

This comes at a time when countries are trying different approaches to regulate cryptos, as more and more investors enter into this space, looking to earn quick profits. In today’s column, we take a look at how India and other countries regulate digital assets.

Understanding Crypto tax in India

Before we delve into crypto taxation laws around the world, it is important to understand how crypto tax works in India. In India, 30 per cent income tax is levied on income earned from the transfer of VDAs, including NFTs. “Taxpayers cannot set off losses arising from one VDA with the income from another VDA. The current income tax laws allow taxpayers to set off their long-term losses against long-term capital gains. However, this is not allowed for income arising from the transfer of VDAs,” said Advocate Ishan Kapoor, who works as a Special Counsel with law firms in Mumbai and New Delhi, advising on matters relating to policy regulation and crypto tax.

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Kapoor explains that if you make a profit by transfer of Bitcoin (BTC) and a loss from the transfer of Ethereum (ETH), you cannot deduct the loss from the transfer of ETH from the profit by transfer of BTC. “You will have to pay a flat 30 per cent tax on the profits from the transfer of BTC,” adding that “losses from crypto transfer cannot be set off against any other income. So, investors cannot set off losses from the transfer of VDAs against income from the transfer of another physical asset such as property, or equity stocks or mutual funds.”

Further, losses from the transfer of VDAs cannot be carried forward to the next year. This means that losses from the transfer of VDAs cannot be set off against prospective future gains arising in subsequent financial year(s).

Advocate Ishan Kapoor, works as a Special Counsel with law firms in Mumbai and New Delhi, advising on matters relating to policy regulation and crypto tax. (Photo: Ishan Kapoor)

Additionally, to bring VDA transactions under the financial reporting system, every crypto transaction is subject to a 1 per cent Tax Deductible…

Read more at indianexpress.com

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