The Reserve Bank of India (RBI) attempted to ban cryptocurrencies in 2018, but the Supreme Court struck down the proposal, placing cryptocurrencies in a legal limbo that is neither formally unlawful nor legally acceptable. NFTs suffer from the same ambiguous legal status as cryptocurrencies but do not seem to have drawn the same level of regulatory ire.
Although there have been rumors of a comprehensive cryptocurrency bill, none of these have been made public, and it is still unknown how the Indian government would handle cryptocurrencies. There doesn’t seem to be any current effort to substantively regulate NFTs.
India’s Central Board of Direct Taxes (CBDT) yesterday provided explanations regarding the decision of the government to impose a 1% tax deduction at source (TDS) on cryptocurrencies. Learn more from this ultimate crypto tax guide for India. The regulations, which take effect on July 1, have left the industry uncertain about when to levy the tax and who will be responsible for the expenses. The crypto tax in India was introduced shortly after the government in February of this year approved a 30% tax on cryptocurrency transactions.
The CBDT modified the Income Tax laws in a formal order to outline how businesses must comply as well as the method for reporting that compliance. Exchanges would now be required by the new regulations to withhold tax from cryptocurrency buyers in accordance with section 194S of the Income Tax Act of India.
Additionally, within 30 days of the end of the month in which the deduction was made, these taxes must be paid to the federal government.
A TDS certificate was to be given to the payee within 15 days following the deadline for submitting the tax to the government, according to the laws. Users who request a government tax refund are required to present these certifications.
According to the laws, the payment of the TDS must also be guaranteed by increasing the total payment if the payment for the transfer of virtual digital assets is made in kind.
A new tax framework has been put in place to tax gains and/or income from virtual digital assets (VDAs), which include cryptocurrencies, NFTs, and similar tokens, as well as other assets that the government may designate, while it continues to consider its position on cryptocurrencies and NFTs. As a result, under the Income Tax Act of 1961, there is now a tax of 30% plus surcharge and cess on the transfer of any VDA, such as Bitcoin or Ethereum (Income Tax Act). But it’s still unclear how cryptocurrencies are viewed legally.
When working with crypto portfolio management, one thing you should always keep in mind is that each transaction may have tax repercussions. As a result, you should be familiar with the following information at all times:
- The sum of your portfolio’s value
- What your positions are worth
- Value changes, both expected and unexpected
- Any other information you want to use to inform your purchasing decisions, such as performance indicators or strategies.
Because of the previously mentioned reasons, it is also crucial to have a general understanding of your performance so you won’t be taken by surprise by taxable profits. Binocs is a one stop solution to tax and crypto portfolio management with a great ease.