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Ethereum ranks as the second-most popular cryptocurrency, trailing only behind Bitcoin. Like its counterparts, Ethereum operates on the foundational technology of blockchain. This technology is a decentralized, shared public ledger that records and verifies all transactions. Each participant in the network possesses an identical copy of this ledger, ensuring transparency and immutability of historical transactions. Transactions, once recorded, cannot be altered. Correcting an error requires adding a new transaction to counteract the original, with both transactions becoming part of the permanent record.
Ethereum’s capabilities extend beyond being just a medium of exchange or a store of value. Its decentralized network enables users to develop and deploy applications directly on the blockchain, akin to running software on a computer. These applications can manage personal data transfers, handle intricate financial transactions, and more.
Moreover, the Ethereum network facilitates computations within its mining process and supports the execution of smart contracts. These contracts, when their predefined conditions are met, are automatically executed, with the Ethereum system self-dispatching Ether to the relevant parties.
Under this network, Ethereum’s native currency, ‘Ether,’ can be held as an investment, a store of value, or used as a digital currency in various financial transactions.
With the 2022 Budget announcement, India’s Finance Minister introduced tax provisions for cryptocurrencies. These provisions mandate taxpayers to pay taxes on profits gained from cryptocurrency transactions. An Ethereum Tax Calculator emerges as a vital tool in this context, designed to compute the tax liability arising from Ethereum transfers, in line with the new income tax calculator.
The ClearTax Ethereum Tax Calculator is designed for simplicity and ease of use, enabling you to ascertain your tax obligations on Ethereum transactions. To use this calculator:
Tax on Ethereum gains is levied at a flat rate of 30%. The taxable amount is the sale price minus the cost of acquisition. No deductions are allowed for transaction costs or exchange fees, only the purchase cost.
Losses incurred from trading Ethereum cannot be set off against other income types such as business, salary, or property income. These losses also cannot be carried forward for offset against future crypto income.
In India, the tax rate on Ethereum transactions is a flat 30% on the profits gained from the transfer.
No, you cannot deduct transaction fees or expenses from your Ethereum tax liability. Only the cost of acquisition is deductible.
Yes, taxpayers are required to report their Ethereum transactions accurately, including the sale and purchase prices, as per the new income tax provisions.