Losses and Taxation of Crypto in India

Investors should be concerned about losses from cryptocurrency investments. Section 115 BBH makes it illegal to offset cryptocurrency losses with cryptocurrency profits—or any other gains or income, for that matter.

In addition, cryptocurrency investors in India are not allowed to deduct any costs other than the acquisition cost or purchase price.

Tax-Free Indian Cryptocurrency

When is Bitcoin going to be tax-free in India? What other cryptocurrencies exist? In India, you will not always be required to pay tax on cryptocurrency in India. There is no tax on cryptocurrency in India while you are:

  • Investing in cryptocurrency.
  • Transferring cryptocurrency between wallets
  • Receiving a cryptocurrency gift of $50,000 or more from close family members.

Tax on Cryptocurrency Lost or Stolen

The ITD has made no definitive recommendations regarding lost or stolen cryptocurrency. However, there is no tax due on any cryptocurrency lost as a result of a hack, con, or theft, according to a number of decisions made by Indian courts on the loss or theft of other types of assets.

Given the ITD’s strict stance on crediting crypto losses against profits, it’s highly unlikely that investors could claim and offset a loss from a lost or stolen crypto asset.

What is the taxation of cryptocurrency gifts?

If you receive a gift of cryptocurrency, whether coins, tokens, or an NFT, you must pay income tax at the appropriate slab rate based on the fair market value of the present.

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However, there are a few exceptions where you will not be required to pay tax while receiving a gift:

  • Gifts from immediate family members (parents, spouses, siblings, taxpayer and spouse’s lineal ascendant or descendant) are not subject to immediate taxation.
  • Receipt-based taxes do not apply to gifts totaling less than $50,000 in a single fiscal year.
  • Marriage-related gifts and inheritances are not taxed at the time they are received.

How Do You Work Out Cryptocurrency Tax?

How do you calculate your earnings when you know you’ll have to pay a 30% tax on them? First, you must determine your cost basis. Your cost basis is the price you paid for your cryptocurrency, or its fair market value (in ) on the day you received it. In contrast to most other tax offices, the ITD does not allow you to increase your cost base through items such as purchase or sale fees. Deduct your cost basis from the sale price once you’ve determined it. If you traded or spent it instead, deduct your cost basis from the cryptocurrency’s fair market value in Indian rupees on the day you sold it. 

Cost-Basis Approach to Cryptocurrency

In fact, the majority of investors calculate profits and losses from multiple crypto assets rather than just one, making tracking your cost basis much more difficult. The cost basis technique determines which assets you sold and when you sold them, which can have a significant impact on your gains and losses. In India, first in, first out (FIFO) and average cost basis accounting are widely used for calculation of crypto capital gains tax

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Is it necessary to pay taxes when purchasing cryptocurrency in India?

Currently, you do not have to pay tax when purchasing cryptocurrency with fiat money. If you buy cryptocurrency through a P2P platform or an overseas exchange, you must deduct 1% TDS and remit the remainder to the seller’s account.

Buying Cryptocurrency in Indian Rupees

Unless you use a P2P site, purchasing cryptocurrency with fiat currency such as Indian rupees is tax-free.

This article contains all of the important points that should be considered or related to cryptocurrency tax payment in India. Nonetheless, before paying taxes on cryptocurrency in India. It is critical that you consult with an expert who has all of the necessary expertise in the preferred field. Binocs gives you a proper guide towards what you need to manage your crypto assets, taxes and track your crypto portfolio.

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