Although unregulated, cryptocurrency is picking up pace in India. During the Union Budget 2022, Finance Minister Nirmala Sitharaman announced a flat 30 percent tax on the income and gains earned through cryptocurrencies and the sale of virtual digital assets. An additional one percent TDS also exists on every crypto transaction.
Many among India’s crypto community have termed it regressive and detrimental. It has led many to ask if there’s a way to avoid paying crypto taxes in India. Let’s see if it is possible, or is it only a hope.
What is Cryptocurrency?
Ok. Let’s begin with the basics. Cryptocurrency is a virtual payment system. It is a peer-to-peer (P2P) system that can enable anyone to send and receive payments. Cryptocurrencies are fully digital entries to an online database that describe a particular transaction. Having cryptocurrency in your digital wallet may eliminate the need to carry physical currency if the receiver accepts it in place of real money.
Cryptocurrency uses encryption to verify transactions. It involves advanced coding to store and transmit cryptocurrency data between wallets and public ledgers. Encryption helps enhance the safety and security of cryptocurrency.
How Does Cryptocurrency Work?
Here’s an overview of how cryptocurrency works for those who are new to it. Cryptocurrencies operate on a distributed public ledger called blockchain – a record of all transactions updated and held by the holder of the currency. The system creates units of cryptocurrency through mining. Users can buy currencies from brokers and store and use them through their cryptographic wallets.
Is it Possible to Avoid Taxes on Cryptocurrency in India?
People want to make the most of their investments. Hence, a flat 30 percent tax can sound a bit too much. As a result, many have been asking such questions.
So, is it possible to avoid cryptocurrency taxes in India? The answer is no. There’s no legal way to avoid paying the 30 percent tax levied by the Indian government on cryptocurrencies and other virtual assets.
If someone says there’s a way to avoid taxes on cryptocurrencies, beware, as by doing so, you might end up in a legal hassle.
According to experts, you will have to pay the required taxes regardless of whether you trade on centralized or decentralized exchanges.
The decentralized thing may create some hope among people looking to avoid crypto taxes. But, beyond technology, there’s also a legal wall that will prevent the escape. Many consider it a loophole. But the question is, wouldn’t the government already know about it and take action against it to avoid expanding the loophole?
The moment you convert your crypto gains to fiat, you will be liable to pay taxes. Besides, amidst the age of technology, it would be silly for anyone to think or assume that the government or tax authorities wouldn’t be aware of their transactions. So, thinking that there would be some way to avoid taxes is impractical.
Remember, it is legally and ethically incorrect to avoid taxes that contribute to the country’s development. So, it is advisable to follow government-imposed rules and regulations concerning tax payments.