How Will The New Cryptocurrency Tax Be Calculated? A Deep Dive

Many see the government's tax announcement as an acknowledgment of the cryptocurrency industry as an emerging asset class

After a long wait and mixed signals over the past two years, there has been some clarity on the taxation of income from cryptocurrency. Presenting the Union Budget on February 1, finance minister Nirmala Sitharaman announced that income from digital asset transfer will invite tax at the rate of 30 per cent. She made clear that no deductions or exemptions, except the cost of acquisition, will be allowed. She also said that crypto gifts will be taxed at the same rate on the side of the receiver. This brought a big clarity to those trading in the emerging industry. Hitherto, they are unsure how their income from crypto trading would be taxed.

What are digital assets?

While the government did not specifically refer to crypto coins, it has classified them and related sectors powered by blockchain technology – like NFTs – as digital assets. And hence this new taxation regime is being simply called the “crypto tax”.

What does this mean?