Considering the voluminous increase in Crypto trader in the country, the government of India have introduced two provision namely section 194S and section 115BBH to bring crypto trading into the ambit of income-tax.
Section 115BBh explains the taxability of gains/profits made from crypto trading and section 194S talks about the applicability of the TDS provision on Crypto Trading.
Section 115BBH: Where the total income of an assessee includes any income from the transfer of any virtual digital assets (cryptocurrencies) such gains shall be taxed at the rate of thirty per cent plus applicable surcharge & cess.
For calculating gains of crypto trading, no deduction in respect of any expenditure (other than the cost of acquisition shall be allowed).
No other losses shall be adjusted with crypto gains and no other gains shall be adjusted with crypto losses. Losses incurred in crypto trading can not be carried forward further in future years.
Tax Calculation on Crypto Gains
|Sale Value of Cryptocurrency||₹10,00,000|
|Purchase Value of Crypto Currency||₹8,00,000|
|Gains from Crypto Currency||₹2,00,000|
|Tax on Above @30%||₹60,000*|
* Above tax is subject to Surcharge & cess.
Whether Crypto Incomes are Capital Gain Income or Business Income?
When you are regularly trading in cryptocurrencies and are involved in activities like mining and selling of cryptocurrencies, then income from such activities will be treated as business income.
When you are holding cryptocurrencies as an investment for some long-term/short-term gains, then such gains will be treated as Capital Gains.
What deduction for expenses incurred in Crypto trading will be considered while calculating gains?
The Government of India in Budget 2022 has clarified that no deduction in respect of any expenditure (other than the cost of acquisition) or allowance or set off of any loss shall be allowed while computing the income from trading in Cryptocurrencies.
Treatment of losses incurred in Cryptocurrencies
Losses incurred in cryptocurrencies will neither be considered for adjusting it with any other income nor be allowed to be carried forward in future years.
Section 115 BBH(2b) clearly states that
“no set off of loss from the transfer of the virtual digital asset shall be allowed against income computed under any other provision of the Act and such loss shall not be allowed to be carried forward to succeeding assessment years.“