The Ultimate Guide to Crypto Taxes in India: Everything You Need to Know (2024)

🚨 ₹180 crore (~$21M) was collected as TDS from crypto transactions in India last year. This highlights the growing adoption of cryptocurrencies in the country—but also underscores the confusion and uncertainty surrounding crypto taxation.

With evolving regulations and complex rules, many Indian crypto users are still unclear about when and how taxes apply to their crypto activities. From trading and staking to NFTs and airdrops, there’s a lot to unpack.

This blog simplifies the state of crypto taxes in India with 10 key points, real-life examples, and actionable insights to help every Indian crypto user stay compliant. Let’s dive in!

1. When Does the Flat 30% Tax Apply?

In India, Section 115BBH of the Income Tax Act mandates a flat 30% tax on any profits earned from the transfer of cryptocurrency or Non-Fungible Tokens (NFTs). This tax applies uniformly, regardless of your income tax slab, making it a critical consideration for crypto traders and investors.

What constitutes a transfer?
A transfer includes the following:

• Selling cryptocurrency or NFTs for fiat currency.
• Exchanging one cryptocurrency for another.
• Surrendering crypto assets in any other way.

How Are Profits Calculated?

Profits are calculated as:
Profit = Sale Price - Purchase Cost

Example:

If you purchased 1 Bitcoin for ₹1 lakh and later sold it for ₹1.5 lakh, your profit is ₹50,000.
Tax = 30% of ₹50,000 = ₹15,000.

Source

2. When Does 1% TDS Apply?

According to Section 194S, 1% TDS (Tax Deducted at Source) is applicable on crypto transactions involving the purchase of Virtual Digital Assets (VDAs) from a resident seller. This TDS ensures the government tracks crypto transactions and collects taxes upfront.

Exceptions to the TDS Rule:

• No TDS is deducted for trades on international exchanges or decentralized exchanges (DEXs).
• TDS is mandatory for P2P transactions.
• Transfers between your own wallets are not subject to TDS.

Effective Date:

The rule came into effect on July 1, 2022.

Example:

If you buy 1 ETH via a P2P transaction for ₹1 lakh, the buyer must deduct ₹1,000 as TDS (1%) and pay ₹99,000 to the seller.

Source

3. How Are Crypto Payouts Taxed?

Crypto payouts, such as salaries paid in cryptocurrency, are taxable under two events:

1. Receipt of Salary:

The market value (MV) of the cryptocurrency on the date of receipt is taxed as salary income, according to your income tax slab rate.

2. Sale of Crypto:

When the received crypto is sold, a 30% tax is applicable on profits (Sale Price - MV). Additionally, 1% TDS is deducted by the buyer.

Example:

• Received BTC as salary worth ₹1 lakh.
• Later sold BTC for ₹1.5 lakh.

Calculation:

1. Salary Tax: ₹1 lakh taxed as per your slab rate.
2. Sale Tax: Profit = ₹1.5 lakh - ₹1 lakh = ₹50,000.

• 30% of ₹50,000 = ₹15,000.
• 1% TDS = ₹500.
  Total Tax on Sale: ₹15,500 (excluding slab tax).

Source

4. How Are Airdrops Taxed?

Airdrops are classified as taxable events and are taxed twice:

1. On Receipt: The market value (MV) of the tokens at the time of receipt is taxed as Other Income.
2. On Sale: A flat 30% tax applies to profits (Sale Price - MV).

Note: If no market value is available when the airdrop is received, the tax applies to the entire sale amount.

Example:

• Received an airdrop worth ₹10,000.
• Sold it later for ₹20,000.

Calculation:

• Profit = ₹20,000 - ₹10,000 = ₹10,000.
• Tax = ₹3,000 (30% of ₹10,000).

Source

5. How Are Crypto Gifts Taxed?

Gifting cryptocurrency may seem straightforward, but it has specific tax implications. Gifts are taxed under two events:

1. On Receipt:

• Gifts received from relatives are tax-free.
• Gifts from others are exempt up to ₹50,000 annually. Any amount exceeding ₹50,000 is taxed as per slab rates.

2. On Sale:

• When the gifted crypto is sold, a 30% tax applies to the profit, calculated as:
  Profit = Sale Price - (Cost to the previous owner or taxed Gift Income).

Example:

• Gift worth ₹60,000 received → ₹10,000 taxable.
• Sold the gift for ₹80,000 → Profit = ₹20,000.
• Tax = ₹6,000.

Source

6. Are Crypto Mining Rewards Taxable?

Crypto mining rewards are taxed during two events:

1. Receipt of Reward:

The market value (MV) of the mined cryptocurrency at the time of receipt is taxed as Business Income under your income tax slab.

2. Sale of Crypto:

A flat 30% tax is applicable on profits (Sale Price - MV), and 1% TDS is deducted by the buyer.

Example:

• Mined crypto worth ₹1 lakh → Sold later for ₹1.5 lakh.
• Profit = ₹50,000.
• Tax = ₹15,000 (30% of ₹50,000) + ₹500 TDS.

Source

7. Is Income from Staking or Yield Farming Taxable?

Staking and yield farming income are also taxed during two events:

1. Reward Claimed: The market value of the reward at the time of claiming is taxed as Other Income.
2. Sale of Crypto: A flat 30% tax is applied to profits (Sale Price - MV).

Example:

• Claimed staking rewards worth ₹1 lakh → Taxed as Other Income.
• Sold later for ₹1.5 lakh → Profit = ₹50,000.
• Tax = ₹15,000 (30% of ₹50,000).

Source

8. How Is Crypto Trading or Investing Taxed?

Trading and investing in cryptocurrencies attract a flat 30% tax on profits, plus applicable surcharge and cess.

Key Rules:

• The tax applies only to profits.
• No deductions for brokerage, fees, or other expenses.

Example:

• Bought ETH for ₹1 lakh → Sold for ₹2 lakh.
• Profit = ₹1 lakh.
• Tax = ₹30,000 (30% of ₹1 lakh).

Source

9. Are Crypto Borrowing and Repayments Taxable?

Borrowing crypto or repaying a loan in crypto is not taxable. However, profits made from trading with borrowed funds are taxed at a flat 30% rate.

Example:

• Borrowed 1 ETH worth ₹1 lakh → Traded and earned ₹50,000.
• Tax = ₹15,000.

Source

10. How Are NFTs Taxed?

Non-Fungible Tokens (NFTs) are treated as Virtual Digital Assets (VDAs) and are taxed at a flat 30% rate.

Example:

• Bought an NFT for ₹1 lakh → Sold for ₹2 lakh.
• Profit = ₹1 lakh.
• Tax = ₹30,000 (30% of ₹1 lakh).

Source

FAQs: Your Questions About Crypto Taxes Answered

1️⃣ If my wallet is hacked after making profits, do I still pay tax?

Yes, taxes must be paid on profits earned before the hack. The unfortunate loss of funds does not exempt you from tax liabilities.

2️⃣ What if I receive USDC as a salary?

Receiving USDC as salary is treated as regular salary income. It is taxed based on the market value of the USDC at the time of receipt.

3️⃣ Can the government track trades on a DEX?

Yes, authorities can trace transactions on decentralized exchanges (DEX) using blockchain analytics tools. Staying compliant and reporting these trades is essential.

4️⃣ Is there tax or TDS on wallet transfers?

No, transfers between your personal wallets are neither taxed nor subject to TDS. These are considered non-taxable events.

5️⃣ Do losses from one crypto trade offset gains from another?

No, losses from one trade cannot be deducted from gains in another. Each profitable trade is taxed individually at the applicable rates.

6️⃣ Are airdrops fully taxed when sold?

Airdrops are taxed twice:

• On receipt as "Other Income", based on market value.
• On profits earned when the airdrop is sold, taxed at 30%.

Final Note

Thank you, Web3CA, for simplifying crypto tax regulations in India. Your clear insights on TDS, 30% tax rules, and NFT taxation have been invaluable for helping the crypto community stay compliant and confident. For personalized guidance on crypto taxes, reach out to Web3CA

Your efforts make navigating crypto taxes much easier. 🙌