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Even though profit from cryptocurrencies like Bitcoin and Ethereum are taxed at 30%, that is only on converting that into Indian fiat, only then the citizen has to pay the tax of 30% of profits of crytpocurrencies.

Union Budget 2022 Outcome:

  1. Income from transfer of virtual digital assets such as crypto, NFTs will be taxed at 30%.

Source

Crypto is taxed like stocks and other types of property. When you realize a gain after selling or disposing of crypto, you're required to pay taxes on the amount of the gain. The tax rates for crypto gains are the same as capital gains taxes for stocks

Source

At the same time they cannot put GST(Goods and Services Tax) on payments in the form of cryptocurrencies as it is not legal tender.

Cryptocurrency will never be a legal tender in India: Finance secretary (Source)

Now, as long as the citizen keeps the profit or money in the form of cryptocurrencies and keeps circulating it, without ever converting it into fiat, he should not be taxable, technically.

This is huge issue as GST is put on the time of transaction and if that happens completely in cryptos, how can the Govt of India put GST on such transactions?

With increasing adoption of cryptos this needs to be addressed. So what should people do regarding filing GST if their money is collected in terms of cryptos?

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Cryptocurrencies are neither goods nor services

Under Indian law, they are treated as securities so no GST is payable.

Capital gains taxes are payable when the gain is realised

That means, when you dispose of the asset by:

  • selling it for money (Indian, Japanese, US doesn’t matter)
  • trade it for another asset, e.g. trading Bitcoin for Etherium
  • use it to buy good or services
  • give it away
  • etc.

You do not have to convert it into Indian currency to trigger a capital gains tax event. If you buy Bitcoin and keep Bitcoin then you don’t owe tax; the instant you don’t own that Bitcoin anymore, you owe 30% on the gain. A transaction entirely in cryptos is still a transaction and makes you liable for capital gains tax.

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  • Now here's the problem if I own a Bitcoin and comvert it into Ethereum. In what currency should I pay tax as? Is there GST on barter system as well?
    – Profile name
    Commented Apr 11, 2022 at 9:41
  • If you are paying tax in India you have to pay in Indian Rupees. And yes, you have to pay tax (GST, income, or capital gains) on barter transactions.
    – Dale M ♦
    Commented Apr 11, 2022 at 10:32

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