Income tax tweak that cryptocurrency investors must know during ITR filing

 







Income tax rules for virtual asset investors has changed from today. As per new income rules from April 2022, a cryptocurrency investor will have to pay 30 per cent flat income tax on one's income on one's investment. However, there is a catch in this income tax rule. In the new income tax rule for 2022 in regard to Virtual Digital Asset (VDA), the loss in one virtual asset will not be set off from profit in other virtual asset. So, the new income tax rule being levied on virtual assets from today suggests that all loss transactions will be ignored for tax calculation and only profit will be calculated.

Speaking on the income tax department's tweak while levying tax on cryptocurrency and other virtual assets; Kunal Jagdale, Founder at BitsAir Exchange said, "The government has provided the clarification on the taxation policy for the individuals. Indian investors can not offset the losses arising from one crypto exchange against the profits from others. This means, even if you make a loss in one asset, you have to pay taxes on the gains on others."

Explaining what does this income tax rule mean for a cryptocurrency investor mean from today; Manoj Dalmia, Founder at Proaasetz exchange said, "As the new financial year starts from 1st April 2022, a new bill comes to law on virtual crypto assets. As per the bill one needs to follow a specific taxation regime for Virtual Digital Asset (VDA) This includes flat 30 per cent tax on profits without any slab deduction. The loss in one VDA will not be set off from profit in another VDA. Hence all loss transactions will be ignored for tax calculation and only profit will be calculated. All trading pairs be it fiat to crypto or crypto to crypto will be a taxable event. Apart from holding and trading even gifting of VDA be will taxable in the hands of the recipient

This tax bill even covers miners as no expenses of setting up mining are allowed as deduction. Therefore mining transaction cost of purchase will be Zero. What can be set off is only the cost of acquisition/purchase on VDA.

So, a cryptocurrency investor must understand that only profit will be taxed flat 30 per cent without any set off on losses and other costs if mining is included. The only cost of acquisition/purchase on VDA will be considered.

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