- By Priyanka Payal
- Thu, 06 Jul 2023 04:52 PM (IST)
- Source:JND
The year 2023 will see crypto investors filing taxes for the first time for gains made in the financial year 2022-23, thanks to the new taxation regime. The Union Government introduced a taxation framework for crypto assets, or virtual digital assets last year.
Cryptos have been classified as a separate asset class in India, they are now considered as virtual digital assets (VDA). Last year was the first time when the government officially termed digital assets, including crypto assets, under “Virtual Digital Assets”. These include all the cryptocurrencies like Bitcoin, Ethereum, etc, and other digital assets such as Non-fungible tokens (NFTs).
The government said that income from the transfer of virtual digital assets such as crypto, and NFTs will be taxed at 30%.
According to the Budget 2022 session, important points that a crypto investor should keep in mind include:
- The income generated from the sale of cryptocurrencies, VDAs, and NFTs, in FY 2022-23 will be subject to a tax rate of 30% and applicable surcharge and cess.
- No deduction, except the cost of acquisition, will be allowed while reporting income from the transfer of digital assets.
- Loss from digital assets cannot be set off against any other income.
- The gifting of digital assets will attract tax in the hands of the receiver. Losses incurred from one virtual digital currency cannot be set off against income from another digital currency.
- There will be a 1% TDS on crypto transactions amounting to Rs 50,000 in a fiscal year. This is applicable to transactions carried out on or after July 1, 2022. There is no TDS if the customer uses Indian Rupee to purchase a Virtual Digital Asset (VDA). However, the TDS of 1% would apply if the same buyer sold the VDA back for INR.
Who all have to pay 5% TDS and why?
As per Section 206AB of the Income-Tax Act, 1961, if you have not filed your Income Tax Return in the past 2 years and the amount of TDS is Rs 50,000 or more in each of these two previous years, then the tax to be deducted as TDS for Crypto-related transactions will be at 5%.
Can I check the TDS details on Government portal?
You can see the details of the tax deducted in your Form 26AS (a consolidated annual tax statement issued by the Tax Department that shows the details of tax deducted at source) when the same is updated by the Department.
Can an individual claim the crypto TDS like other TDS?
Yes! You can claim the tax deducted as TDS on crypto trades when you file ITR for the relevant financial year.
Will tax be deducted even if I am making a loss?
Yes! Whether you book a profit or loss, Tax as TDS will be deducted for every Crypto purchased or sold where applicable. Thus, if you experience a loss on investments in virtual digital assets, then the loss cannot be adjusted/set off against any other income to lower your taxable income and thus reduce your income tax liability. This means that if you sold one Bitcoin at a profit and another one at a loss, you still have to pay a 30% tax to the government on the profit you made in one token.
Recommendations for investors
- Disclose all their centralised exchange wallets, international wallets as well as your DEFI (decentralised finance wallets) in the income tax form.
- Ensure that all the TDS that has been collected by the exchanges on your trades is reflected accurately in your Form 26 because it's been filed against your PAN card.
- There is a section within the new income tax form that pertains to crypto gains. Ensure that your crypto gains are shown in that section at the time of finalisation of your tax returns.
- There are certain challenges around crypto taxation like airdrops, liquidity pools, derivatives and mining. You can seek help from a crypto tax professional if there are a lot of transactions related to these aspects.
How much tax will you pay on crypto in India?
In short, two types of taxes are now set to be imposed on crypto assets. They are 30% tax on the annual profits made from crypto trades and a 1% TDS on every crypto transaction. The TDS cut is eligible to be filed for returns during the ITR filings.
Due Date To File ITR?
Capital Gains: If you report the income as capital gains, the due date to file your income tax return (ITR) will be July 31.
Business Income: If an individual reports the income as business income, they need to calculate the turnover to determine whether they must get their accounts audited. If your turnover is above the specified limit, you must have your accounts audited. In this case, the due date for filing your ITR will be October 31. Besides, you must submit the audit report to the income tax department by September 30. Meanwhile, if your turnover is below the specified limit, the due date to file ITR is July 31.
