What Happens If Crypto Becomes Legal in India?
As India inches closer to formalizing regulations around cryptocurrencies, the spotlight turns to taxation. If digital assets like Bitcoin and Ethereum are granted full legal status, the existing tax framework under Section 115BBH of the Income Tax Act will continue to govern their treatment — and it’s anything but lenient.
30% Flat Tax on Crypto Gains
Under Section 115BBH, income from Virtual Digital Assets (VDAs) such as cryptocurrencies will be taxed at a flat rate of 30%. This applies irrespective of your income bracket. Whether you’re a salaried professional or a full-time crypto trader, all gains are treated equally — and taxed heavily.
No Set-Off or Deductions
One of the more stringent aspects of VDA taxation is that no deductions are allowed for any expenses, except for the cost of acquisition. Additionally, losses from crypto trading cannot be set off against any other income or carried forward to future years. This rule significantly limits tax-saving opportunities for regular traders.
1% TDS on Crypto Transactions
Alongside the 30% tax, a 1% TDS (Tax Deducted at Source) continues to apply under Section 194S for crypto transactions exceeding certain thresholds. This is applicable on every sale, reducing liquidity and requiring traders to manage cash flow more carefully.
Tax on Crypto Gifts
Crypto received as a gift is also taxable in the hands of the recipient, unless it falls under specific exemptions (like gifts from immediate family). This adds another layer of complexity, especially for influencers, content creators, and NFT artists accepting crypto-based payments or donations.
Why You Need Expert Guidance
The current legal and tax treatment of crypto in India demands professional planning and compliance. With no room for error and limited tax relief, both individual investors and businesses should seek expert advice.From maintaining clear transaction records to understanding TDS applicability, a tailored tax strategy can make all the difference in staying compliant and minimizing tax liabilities.
