Crypto Tax in India: Date, income tax, ITR form, TDS, deduction | Key points

 









As the ongoing financial year 2021-22 draws to a close, there has been a lot of chatter pertaining to crypto-tax in India. The central government in Union Budget 2022 proposed the introduction of a specific tax regime for virtual digital assets.

Finance Minister Nirmala Sitharam in the Union Budget announced the details of the taxation of virtual digital assets, stating that the magnitude and frequency of transactions in virtual digital assets have increased phenomenally.

The government has proposed any income from the transfer of any virtual digital asset be taxed and a provision has been made for Tax Deducted at Source (TDS) on payment made in relation to the transfer of a virtual digital asset in order to capture the transaction details.
INCOME TAX ON DIGITAL ASSETS

FM Sitharama proposed that "any income from the transfer of any virtual digital asset shall be taxed at the rate of 30 per cent."

Basically, this means you have to pay a tax of 30 per cent on any income from the transfer of any virtual digital asset.

Experts opined that the 30 per cent tax levied on income arising from the sale of cryptocurrency is similar to the tax rate on winnings from lottery, game shows, puzzles etc, PTI reported.
TDS, LOSS, GIFT

In budget 2021, it was also proposed that the Government would make a provision to provide for TDS on payment made in relation to the transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.

Apart from this, loss from transfer of virtual digital asset cannot be set off against any other income.

The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1, according to a PTI report.

Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
DEDUCTION
The government proposed that the tax regime for virtual digital assets would not allow any deduction in respect of any expenditure or allowance while computing such income except cost of acquisition.
Infrastructure cost incurred in the mining of cryptocurrencies or any virtual digital assets will not be allowed as deduction under the Income Tax Act, Minister of State for Finance Pankaj Chaudhary said on Monday.
The minister said that while computing the income from transfer of VDA, no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed.
"The (Finance) Bill also proposes to define VDA. If any asset falls within the proposed definition, such virtual asset will be considered as VDA for the purposes of the Act and other provisions of the Act will apply accordingly," he said.
Further, he said, "infrastructure costs incurred in the mining of VDA (eg. crypto assets) will not be treated as cost of acquisition as the same will be in the nature of capital expenditure", which is not allowable as a deduction under the I-T Act.
CRYPTO TAX DATE

Crypto investors must note that there is a taxability of the cryptocurrency transaction for the ongoing financial year ending on March 31. So any transaction involving crypto assets before April 2022 will attract income tax.


"The taxability of the crypto-currency is certain for this financial year too. Crypto investors should know that the transactions done before April 2022 will not be tax-free," Central Board of Direct Taxes (CBDT) Chairman JB Mohapatra said.
ITR FORM ON CRYPTO TAX

Revenue Secretary Tarun Bajaj said gains from cryptocurrencies were always taxable. "The provision in the Finance Bill is related to taxation of virtual digital assets. It is to bring certainty in taxation of cryptocurrencies. It does not convey anything about its legality which will come out once the Bill (on regulating such assets) is introduced in Parliament," he said, according to PTI.

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