Is Cryptocurrency Taxed in India?
Yes. The Finance Act, 2022 states that cryptocurrencies and non-fungible tokens (NFTs) are classified as Virtual Digital Assets (VDAs) subject to taxes.

“ ‘Virtual digital asset’ means‒‒

(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically”

(b) a non-fungible token or any other token of similar nature, by whatever name called;

(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify”

VDAs are a class of capital assets in the Indian tax code distinct from other classes of capital assets such as stocks and equity. The Finance bill makes cryptocurrency “transfers” taxable effective April 1, 2021. According to the Income-tax Act, Section 2, (47), a “transfer” includes (as related to crypto):

(i) the sale, exchange, or relinquishment of the asset; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law

There are two tax rates applicable to cryptocurrency income and profits:

30% flat income tax rate, effective April 1, 2022.
1% Tax Deducted at Source (TDS), effective July 1, 2022.
Note: the 2022 Finance act has only addressed high-level cryptocurrency taxation. The bill has not clarified taxation for other types of income such as staking, mining, lending, borrowing, DeFi, and other types of cryptocurrency transactions. Therefore, the tax implications below could vary as the Indian Revenue Service (IRS) issues more specific guidance in the future. For tax advice, please consult a tax professional.

Below are some of the common taxable events and likely tax implications based on the limited guidance issued so far.