The document summarizes the taxation of cryptocurrencies in India. It defines cryptocurrencies as virtual digital assets under Indian law and outlines how they are taxed. Income from transferring cryptocurrencies is taxed at 30% and is subject to TDS of 1% by the payer. Gains from gifting cryptocurrencies are also taxed. Cryptocurrency exchanges providing trading services are subject to 18% GST. Overall, the document provides an overview of the key Indian tax and legal provisions related to cryptocurrencies.

1. Taxation of
Cryptocurrencies
– Virtual Digital
Assets in India
Presentation
By
Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
Email id: vpdalmia@gmail.com
Mobile No.: +91 9810081079
LinkedIn: https://www.linkedin.com/in/vpdalmia/
Facebook: https://www.facebook.com/vpdalmia
Twitter: @vpdalmia
&
Siddharth Dalmia
Crypto & Blockchain Advisor
Email id: dalmiasiddharth1994@gmail.com
LinkedIn: https://www.linkedin.com/in/siddharth-dalmia-
988b58a9/

2. Legality &
Legitimacy of
Cryptocurrenc
ies in India
• “Everything which is not forbidden is allowed" is a legal maxim.
https://en.wikipedia.org/wiki/Everything_which_is_not_forbidden_is_allowed
• A senior English judge, Sir John Laws, stated the principles as: “
• For the individual citizen, everything which is not forbidden is
allowed;
but
• For public bodies, and notably the government, everything
which is not allowed is forbidden.
• There is no law in India that deals with the legitimacy and legality of
cryptocurrencies/NFTs in India.
• Mere inclusion or bringing cryptocurrencies/NFTs within the tax net
by amending the Indian Income Tax Act does not provide or deal
with the legitimacy and legality of cryptocurrencies/NFTs in India.
• Taxability of illegal money earned has nothing to do with the
legitimacy of the means of earning.
• Since cryptocurrencies/NFTs have not been declared illegal, the
same will fall into the category of legal.

3. Definition of
Cryptocurrencies
– Virtual Digital
Assets in India
Virtual Digital Assets have been
defined for the first time in the
year 2022 in India under
Section 2(47A) of the Income
Tax Act, 1961
Ref:
https://www.indiabudget.gov.in/doc/Finance_Bill
.pdf
And
https://www.indiabudget.gov.in/doc/memo.pdf

4. Definition
Virtual Digital
Asset
“Virtual Digital Asset” means—
Any
• information or
• code or
• number or
• token
• (not being Indian currency or foreign currency),
• the expressions “currency”, “foreign currency” and
“Indian currency” shall have the same meanings as
respectively assigned to them in clauses (h), (m) and
(q) of section 2 of the Foreign Exchange Management
Act, 1999 (42 of 1999).]
generated through
• cryptographic means or
• otherwise,
• by whatever name called,

5. Continued…
Definition of
Cryptocurrencie
s – Virtual
Digital Assets in
India
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.

6. Continued…
Definition of
Cryptocurrencie
s – Virtual
Digital Assets in
India
“Virtual Digital Assets” include
• a non-fungible token (NFT) or
• any other token of similar nature,
• by whatever name called;
• “non-fungible token” means such digital asset as the Central
Government may, by notification in the Official Gazette, specify.
• any other digital asset,
• as the Central Government may, by notification in the Official
Gazette specify.
• Provided that the Central Government may, by notification in the
Official Gazette, exclude any digital asset from the definition of the
virtual digital asset subject to such conditions as may be specified
therein.
Virtual Digital Assets & Cryptocurrencies as Property
• Section 56(2)(X) includes ‘Virtual Digital Asset’ within the definition of
‘Property’.

7. Indian
Legislation(s)-
On
Indian
Legislations-
Impact –
Cryptocurrenc
ies
Impact
 At the moment, there is no specific law that classifies virtual currencies as a good,
service, security, commodity, derivatives or currency.
 For the first time Section 56(2)(X) of the Income Tax Act has defined ‘Virtual Digital
Asset’, and includes it within the definition of ‘Property’ i.e. movable properties.
 Some of the laws which have a direct bearing on the legal aspects relating to
illegal Virtual Currencies like Bitcoins, are as under:
i. The Constitution of India, 1950;
ii. Reserve Bank of India Act, 1934,
iii. The Foreign Exchange Management Act, 1999 (“FEMA”);
iv. The Reserve Bank of India Act, 1934 (“RBI Act”);
v. The Coinage Act, 1906 (“Coinage Act”);
vi. The Securities Contracts (Regulation) Act, 1956 (“SCRA”);
vii. The Sale of Goods Act, 1930 (“Sale of Goods Act”);
viii. The Payment and Settlement Systems Act, 2007 (“Payment Act”).
ix. Indian Contract Act, 1872 (“Contract Act”).

8. Section 115BBH
Income Tax Act
Taxed How?
Rate etc.
Where the total income of an assessee
• includes any income from the transfer of any virtual digital asset,
• the income-tax* payable shall be the aggregate of-
• the amount of income-tax calculated on the income from transfer of
such virtual digital asset at the rate of Thirty per cent
(30%);
AND
• the amount of income tax with which the assessee would have been
chargeable, had the total income of the assessee been reduced by
the income referred to in clause (a).
*Income tax is levied on the income earned by all the individuals, HUF, partnership firms , LLPs and
Corporates as per the Income tax Act of India. In the case of individuals, tax is levied as per the slab
system if their income is above the minimum threshold limit (known as basic exemption limit )

9. Section 115BBH
Income Tax Act
Taxed How?
Rate etc.
Deductions &
Calculation
Continued…
Notwithstanding anything contained in any other provision of
the Income Tax Act,––
• no deduction in respect of any expenditure
• (other than the cost of acquisition) or
• allowance or
• set off of any loss
• shall be allowed
• to the assessee under any provision of this Act in computing the
income referred to in clause (a) of sub-section (1);
AND
• no set-off of loss from transfer of the virtual digital asset
• computed under clause (a) of sub-section (1) shall be allowed
against income computed under any other
• provision of this Act
• to the assessee and
• such loss shall not be allowed to be carried forward to
succeeding assessment years.

10. Section
194S
Income Tax Act
TDS
Payment on
transfer of
virtual digital
asset
• Any person responsible for paying to a resident any sum
• by way of consideration
• for transfer of a virtual digital asset, shall,
• at the time of credit of such sum to the account of the
resident or
• at the time of payment of such sum by any mode,
whichever is earlier,
• deduct an amount equal to one per cent (1%) of such sum as
income-tax thereon
• Provided that in a case where the consideration for transfer of
virtual digital asset is-
• wholly in kind or in exchange of another virtual digital
asset, where there is no part in cash; or
• partly in cash and partly in kind but the part in cash is not
sufficient to meet the liability of deduction of tax in
respect of whole of such transfer,
• the person responsible for paying such consideration
shall, before releasing the consideration,
• ensure that tax has been paid in respect of such
consideration for the transfer of virtual digital asset.
 This Section is applicable to both cash and barter transactions.
 This Section also applies to exchanges as well as individuals.

11. Section
194S
Income Tax
Act
No Deduction
of TDS
• No tax shall be deducted in a case, where--
• the consideration is payable by a specified person and the value or aggregate
value of such consideration
• does not exceed fifty thousand rupees
• during the financial year;
OR
• the consideration is payable by any person other than a specified person and
the value or aggregate value of such consideration does not exceed ten
thousand rupees during the financial year.
• No other deduction under any other provision of the Act.
TDS?
TDS is the collection of tax from the very source of income.
A person (deductor) who is liable to make payment of specified nature to any
other person (deductee)
shall deduct tax at source and remit the same into the account of the Central
Government.
The deductee from whose income tax has been deducted at source would be
entitled to get credit of the amount so deducted.
(https://www.incometaxindia.gov.in/Pages/Deposit_TDS_TCS.aspx#:~:text=The%20concept%20of%20TDS%
20was,account%20of%20the%20Central%20Government.)

12. Calculation of
Income Tax
Payable
• Income Tax is payable at the rate of 30% on amount of income
received from transfer of virtual digital assets/cryptocurrencies.
• Income Tax will also include SURCHARGE + CESS in certain cases.
• Income tax surcharge is an additional charge payable on income tax. It is an added tax on the
taxpayers having a higher income inflow during a particular financial year.
(https://www.incometaxindia.gov.in/_layouts/15/dit/mobile/viewer.aspx?path=https://www.inco
metaxindia.gov.in/charts++tables/tax+rates.htm&k&IsDlg=0)
• Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.
• Formula:
• Total income including income from virtual digital assets/cryptocurrencies
• (- or Deduct)
income from transfer of virtual digital assets/cryptocurrencies
=
Income (except the income from
virtual digital
assets/cryptocurrencies) on which
tax is payable as per the provisions
of the Income Tax Act
* Income from virtual digital
assets/cryptocurrencies
On which income tax is payable at
the rate of 30%
* Sale/transfer price of virtual digital asset/cryptocurrency
Less
Cost of acquisition of virtual digital asset/cryptocurrency
Less
(NOT ALLOWED:
• no deduction in respect of any expenditure or
• allowance or
• set-off of loss from transfer (sale) of the virtual digital asset–
cryptocurrency) in any manner.
= Income on which Tax is payable.
 No carry forward of losses from transfer (sale) of the virtual digital asset–
cryptocurrency) in any manner

13. Gift/Transfer of
virtual digital
assets/crypto
currencies
Without
consideration
-
Tax implications
• Tax payable as per provisions of section 56(2)(X) of the
Income Tax Act
• Where any property/ virtual digital assets/cryptocurrency,
other than the immovable property is transferred
• without any consideration
• Example: Gift
• the aggregate fair market value of which exceeds fifty
thousand rupees,
• the whole of the aggregate fair market value of such
property.
OR
• for a consideration which is less than the aggregate fair
market value of the property
• by an amount exceeding fifty thousand rupees,
• the aggregate fair market value of such property as
exceeds such consideration.

14. GST-
Applicability
on
Cryptocurrenc
ies
• The taxable event in GST is supply of goods or
services or both.
• The term, “supply” has been inclusively defined
in the Act.
• Supply of goods or services or both(Supply of
anything other than goods or services does not
attract GST).
• Supply should be made for consideration.
• Supply should be made in the course or
furtherance of business.
• Supply should be a taxable supply.

15. GST-
Applicability
on
Cryptocurrenc
ies
• “Goods”
• has been defined as every kind of movable property
• other than money and securities but includes
actionable claim, growing crops, grass and things
attached to or forming part of the land which are
agreed to be severed before supply or under a contract
of supply.
• “Services”
• means anything other than
• goods,
• money and
• securities
• but includes activities relating to the use of money or
its conversion by cash or by any other mode, from one
form, currency or denomination, to another form,
currency or denomination for which a separate
consideration is charged.

16. GST-
Applicability
on
Cryptocurrenc
ies
• Where certain activities or transactions
constitute a supply in accordance with the
provisions of section 7 (1) of the CGST Act, 2017,
they shall be treated either as supply of goods or
supply of services as referred to in Schedule II.
• Schedule III to the CGST Act, 2017 spells out
activities which shall be treated as neither supply
of goods nor supply of services.
• Consideration has specifically been defined in the
CGST Act, 2017. It can be in
• money or
• kind.
BARTER
• When there is a barter of goods or services, the
same activity constitutes supply as well as a
consideration.

17. GST-
Applicability
on
Cryptocurrenc
ies
Consideration for Supply
• It is immaterial whether the payment is made by
• the recipient or
• by any other person.
• When there is a barter of goods or services, the
same activity constitutes supply as well as a
consideration.
Supply in the Course or Furtherance of Business
• GST is essentially a tax only on commercial
transactions. Hence only those supplies that are
in the course or furtherance of business qualify
as Supply under GST.
• Any supplies made by an individual in his
personal capacity do not come under the ambit
of GST unless they fall within the definition of
business as defined in the Act.

18. GST-
Applicability
on
Cryptocurrenc
ies
• Supply by a Taxable Person
• A supply, to attract GST, should be made by a taxable
person.
• Hence, a supply between two non-taxable persons does
not constitute supply under GST.
• A “taxable person” is a person who is registered or
• liable to be registered under section 22 or section 24.
• Hence, even an unregistered person who is liable to be
registered is a taxable person.
Taxable Supply
• For a supply to attract GST the supply must be taxable.
• Taxable supply has been broadly defined and means any
supply of goods or services or both which is leviable to
tax under the Act.
https://www.cbic.gov.in/resources//htdocs-
cbec/gst/The_Meaning_and_Scope_of_Supply_new.pdf

19. GST-
Applicability
on
Cryptocurrenc
ies
GST is payable on all Goods & Services
 Any Goods which are not specified will attract GST which will become payable @ 18%
 Any services which are not specified will also attract GST which will become payable @ 18%
Cryptocurrencies, NFTs which are treated as Virtual Digital Assets and included in the definition of
Property under the provisions of the Income Tax Act will fall in the category of Goods, accordingly,
GST (CGST & SGST) will become payable @ 18%
Similarly, EXCHANGES of Cryptocurrencies & NFTs which are treated as Virtual Digital Assets and
included in the definition of Property under the provisions of the Income Tax Act are providing
Services through their customers, accordingly, GST (CGST & SGST) will become payable @ 18% on the
commission generated by them.
https://cbic-gst.gov.in/pdf/new-faq-on-gst-second-edition.pdf
https://www.cbic.gov.in/resources//htdocs-cbec/gst/Schedule%20of%20GST%20rates%20for%20services.pdf
https://www.cbic.gov.in/resources/htdocs-cbec/gst/GSTratescheduleforgoodsason31032021.pdf
https://www.cbic.gov.in/resources/htdocs-cbec/gst/services-booklet-03July2017.pdf

20. Queries,
clarifications and
inputs are
welcome.
THANK YOU.
Presentation
By
Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
Email id: vpdalmia@gmail.com
Mobile No.: +91 9810081079
LinkedIn: https://www.linkedin.com/in/vpdalmia/
Facebook: https://www.facebook.com/vpdalmia
Twitter: @vpdalmia
&
Siddharth Dalmia
Crypto & Blockchain Advisor
Email id: dalmiasiddharth1994@gmail.com
LinkedIn: https://www.linkedin.com/in/siddharth-dalmia-
988b58a9/