How to File Crypto Taxes in 2023 as an NRI? (2024)

Since crypto taxation was introduced, this might be the first time for many traders to file tax. If you are an NRI and filing taxes, this article will explain to you how to pay taxes on your crypto gains based on your scenario.

Cryptocurrencies have gained significant traction in the past few years. They have emerged as an alternative asset class that can provide significantly higher returns than any other traditional assets and investment options. Seeing this asset class emerging in India, the Indian government introduced a tax on crypto in India in the Union Budget 2022. It was introduced to regulate cryptocurrency in India, but many people did not welcome the higher tax slab that was provided for this.

Indian government put a flat 30% income tax rate for virtual digital assets and profits arising from their transactions. In India, a significant portion of crypto transactions is carried out by NRIs, and they are somewhat complex to track and tax.

Due to the introduction of newer taxation laws, filing crypto tax for NRIs can be a bit challenging. In India, NRIs have to pay source-based taxing. Under this system, taxes are to be paid only on amounts whose source is within the country.

There can be different scenarios under source-based taxing, and each scenario may point to a different taxation approach. Even though you are an NRI, Indian laws are applicable to you, as you still hold Indian citizenship.

To make the taxation easier for you, we have come up with three different scenarios of crypto trading which might be helpful for you to decide how to pay taxes on crypto gains.

Three Different Scenarios.

Crypto Trading on Foreign Exchanges

Suppose you are an NRI who does crypto trading on foreign exchange while you are outside the country and realises profits. In such cases, your profits are not taxed as they were gained outside India, and the exchange was also located outside India. In this case, though you are not taxed in India, you are responsible for paying taxes in the country where you have made the transactions if the country has a specific crypto taxation law.

If you live in a different country and have started trading cryptocurrencies there, you can be sure that there is no relation between your income with Indian laws. You can pay taxes as per the new country's law, and that is better too. Moreover, even when you come back to India, you are not liable to report or show these incomes in your ITR.

Also Read: Best Crypto Exchanges

Crypto Trading on Indian Exchanges

If you are an NRI who has been doing cryptocurrency trading for a long time in India and you've migrated to a different country recently, you'll relate to this scenario.

Under this scenario, if you continue to carry out trades on Indian cryptocurrency exchanges and withdraw money to any Indian bank accounts, you are liable to pay cryptocurrency tax in India itself.

This scenario is going to be a bit challenging for you as you have to file the entire ITR even if you don’t live in the country now. But it is mandatory for you to do this.

Change in Citizenship

Till now, there is nothing specified in the laws on what happens when the citizenship of an individual changes after he purchases cryptocurrencies and other digital assets in India.

In today's times, citizenship changes are pretty standard, and thousands of Indians undergo this every year. In such cases, taxation on VDAs becomes challenging for the government.

Also Read: The Future of NFTs and VDAs

As these are intangible assets, the income generated from them will be taxed in the country you stay. But some courts have given clarification that the taxes are applicable only in the country where the crypto owner stays. So if you buy in India and your citizenship changes to the US, you'll have to pay crypto taxes according to USA laws.

By now, we have discussed the typical scenarios you may face while going for crypto taxes. But if you have any other scenario, you should consult a taxation specialist before filing your returns to avoid any issues.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.