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Know how much tax need to pay if someone wants to invest in Cryptocurrency in India – Times Bull

Know how much tax need to pay if someone wants to invest in Cryptocurrency in India

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Cryptocurrency

Following Donald Trump’s election victory, there has been an unprecedented surge in the prices of all cryptocurrencies, including Bitcoin, which has recently surpassed the $100,000 mark. This development has reignited interest among investors in the cryptocurrency market. If you are considering investing in cryptocurrencies, it is important to understand the tax implications in India. While cryptocurrencies are not recognized as legal tender in India, there is no prohibition against investing in them.

 

Under Section 2(47A) of the Income Tax Act, cryptocurrencies are categorized as virtual digital assets (VDAs), although they have yet to receive formal recognition from the central government. The taxation of VDAs is governed by specific provisions of the Income Tax Act, namely Section 115BBH and Section 194S. These stipulate a flat tax rate of 30% on profits derived from the sale of VDAs, along with a 1% tax deduction at source (TDS) on transactions. Therefore, if you profit from cryptocurrency investments, you will be liable to pay a 30% tax on those earnings.

India is in the process of developing a regulatory framework for cryptocurrencies

Cryptocurrency is defined as a digital or virtual currency secured through cryptography, making it nearly impossible to counterfeit or replicate. These currencies operate on a decentralized network utilizing blockchain technology, which underpins currencies like Bitcoin. On the legal front, India is in the process of developing a regulatory framework for cryptocurrencies. In 2022, the government announced a 30% tax on profits from cryptocurrency transactions. However, despite the taxation, cryptocurrencies cannot be classified as mandatory or fully legal.

Ministry is working on a comprehensive policy for cryptocurrencies

Currently, an inter-ministerial group (IMG) consisting of representatives from the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Finance Ministry is working on a comprehensive policy for cryptocurrencies. The IMG is expected to release a discussion paper, allowing stakeholders to express their opinions before finalizing India’s stance on cryptocurrency regulation.

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