What Are The Various Taxes Levied On Cryptocurrencies?

The Indian Finance Minister Nirmala Sitharaman had recently announced that any income from cryptocurrencies would be taxed thirty percent. This announcement was made in the government’s Budget 2022 presentation. In addition, the finance minister announced the Reserve Bank of India’s plans to introduce a digital currency as soon as 2022.

India’s announcement on tax on crypto income is a great move forward for three reasons:

  1. It recognizes cryptocurrency as a legitimate asset class and trading as a legitimate activity.
  2. Clarity on tax will bring more people into the crypto exchange India industry, boosting industry growth.
  3. It will be easy for innovation to happen in a well-regulated cryptocurrency ecosystem.

Today, more than 1,500 virtual currencies get traded in the crypto trading apps worldwide, including Bitcoin, Ethereum, Litecoin, Dogecoin, Ripple, MessageChain, etc. Since the nationwide lockdown, cryptocurrencies’ trading volume and investment have multiplied several times. Moreover, crypto investments have grown regardless of any regulation from the government or the Reserve Bank of India.

Is cryptocurrency legal?

The Indian government has not granted digital currencies legal tender status to date. The RBI restricted banking facilities to the crypto exchanges in 2018 as part of an effort to ban them. However, the Supreme Court ruled against the ban on constitutional grounds and the fundamental rights of virtual exchanges. However, there is no clarification yet from the income tax department as to whether the gains from crypto transactions on a crypto trading app will be taxable.

Crypto: A currency or an asset?

Tax experts have been pondering whether the crypto in your crypto wallet should classify as a currency or asset during the past few years. However, cryptocurrency and crypto-assets are the names primarily used interchangeably. Although its classification as a ‘currency’ requires some form of legal backing from the government, a safe category is an ‘asset/property.

Since the tax implications would arise regardless of legality, it would be better to categorize them as ‘assets’ than to have the government clarify them. Moreover, the US government issued a notification classifying these cryptocurrencies as ‘property’ and levying capital gains taxes on gains from their sale.

Since the cryptocurrency on the best trading app in India has not yet become legal by the Reserve Bank of India (RBI), one cannot escape its taxation. Therefore, an investor earning profits from the sale of cryptocurrency must pay income tax.

As a general rule, all income is taxable except exempted explicitly by the Income Tax Act. In light of this, investors must continue to pay income tax on cryptocurrency transactions depending on the nature of the transaction until the income tax department clarifies.

How much tax do other countries impose on crypto?

Cryptocurrency purchases and sales are taxable in the United States because the Internal Revenue Service (IRS) identifies it as a property rather than currency. Therefore, it imposed a tax between 0 to 37 percent.

In the Netherlands, individuals’ income is taxed at various rates and using multiple methods, depending on the type of income concerned. The country has imposed a 31 percent tax on cryptocurrency.

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