Is Capital Gains Tax Same As Crypto Tax?


In India, how taxes work has changed a lot in recent years. Crypto is now seen as an asset that is taxed according to the provisions detailed in the Income Tax Act. Traditional rules for capital gains tax from selling assets often look at how long you held them. However, when it comes to cryptocurrencies, the law treats them differently under Section 115BBH of the Income Tax Act, 1961.

Crypto Taxation In India

Money made from buying, selling, or swapping cryptocurrencies gets a 30% flat tax plus an extra 4% fee. This rate is the same for both short-term and long-term profits. It’s different from traditional ways of taxing profits from investments where keeping something for a certain time may change the tax rate.

A reform in the crypto tax regime came in the form of Section 194S on July 01, 2022. This section mandates a 1% Tax Deducted at Source (TDS) on the transfer of crypto assets, provided the crypto transactions exceed ₹50,000 within the same financial year. In some situations, the threshold for TDS is fixed at ₹10,000. This action shows the leaders’ goal to make tax collection easier and make sure rules are followed in the growing world of cryptocurrencies.

To calculate the applicable crypto tax in India, it’s necessary to ascertain the gains first. To determine gains via crypto trading, subtract the cost of acquisition from the sale price. Then calculate 30% of the gains and add 4% cess to ascertain the final tax amount.

Is Capital Gains Tax Same As Crypto Tax?

While capital gains tax has specific terms for long-term and short-term asset transactions, the crypto tax regime doesn’t have it. People who own crypto don’t have to pay different taxes based on how long they’ve owned their assets. A simple 30% (and 4% extra) tax rate gives an easy way. It makes things clear in a world that usually changes quickly and has changing rules.

People who make money from buying and selling cryptocurrencies need to know that they will have to pay taxes on those transactions. This is important for both individual investors and businesses. The flat 30% plus 4% cess tax rate is used for all types of crypto gains, no matter if it is considered capital gains or business income, which makes it different from capital tax gains provisions.

Moreover, the 1% TDS on the transfer of crypto assets adds an additional layer of compliance, which the traditional capital gains tax doesn’t require. The TDS is deducted by all crypto exchanges operating in India. Hence, investors need to be vigilant about transactions exceeding the specified thresholds, as TDS obligations come into play. Furthermore, crypto airdrops are taxed as well while capital assets acquired as gifts aren’t taxed.

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