Budget 2022

Budget 2022: Book long-term capital gains on crypto assets before March 31, might save 10% in taxes

Crypto Finance Government

Budget 2022 highlighted that a 30% tax will be levied on capital gains from crypto-assets beginning April 1, 2022. However, tax on these profits for the current fiscal year, i.e., FY2021-22, remains a hazy issue, with experts taking contrary views. According to one generally held belief, capital gains tax can be paid on these earnings in this fiscal year by adhering to the income tax provisions that apply to capital gains.

Another point of view is that the 30% tax envisaged in Budget 2022 on these earnings must be paid even in the current fiscal year to avoid future litigation. Most experts believe that there is a lack of clarity about this. However, suppose one pays tax on these profits in the current fiscal year (considering them as capital gains on securities). In that case, one may avoid 10% tax by registering long-term crypto gains before March 31, 2021, instead of recording the payments in FY2022-23.

According to one expert, tax on capital gains realized on the sale of crypto assets held for 36 months or longer can be paid at a rate of 20% with indexation for the current fiscal year. From 1.4.2022, a flat 30% tax would be levied on items, with no advantages such as indexation or deductions other than acquisition cost.

However, if the crypto profits in the current fiscal year are of short duration, i.e., the asset was held for less than 36 months, the tax due on them (if classified as capital gains) will be determined by your income tax slab rate. If your marginal income is in the 30% tax band, you will pay the same tax rate on gains realized in this fiscal year as you would if the profits were realized in FY2022-23.

According to the Budget 2022 plan, all profits gained on virtual digital assets (e.g., cryptocurrencies, non-fungible tokens) would be taxed at a fixed rate of 30% plus a 4% surcharge and cess, regardless of how long the asset has been held. Furthermore, just the purchase cost will be allowed as a deduction, with no further deductions or set-offs of losses permitted. The new tax laws for cryptocurrencies and other digital assets will affect the start of the new fiscal year.

The taxation of cryptocurrency sales for the current fiscal year, on the other hand, was not included in Budget 2022.