Know cryptocurrency tax rules in detail Filing ITR
April, 11th 2022
With regards to cryptocurrency taxation from April 1, 2022, investing in cryptocurrency will less profitable than before. However, the government is working on a set of frequently-asked questions (FAQs) to clear the grey areas with respect to the taxation of cryptocurrencies.
"FAQ on taxation of cryptocurrency and virtual digital assets is in works. Although FAQs are for information purposes and do not have legal sanctity, law ministry's opinion is being sought to ensure that there is no loophole," an official told new agency PTI.
In financial year 2022-23, a capital gains tax of 30% will be levied on any income from virtual digital assets (VDA) which can include everything from digital coins such as bitcoin and ethereum and non-fungible tokens.
“As per the bill one needs to follow a specific taxation regime for Virtual Digital Asset ( VDA ) This includes flat 30% 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,” said Manoj Dalmia, Founder, Proaasetz exchange.
“Only profit will be taxed flat 30% without any set off on losses and other costs if mining is included. The only cost of acquisition/purchase on VDA will be considered,” he further added.
A 1% TDS will be applicable on all transactions whether buying or selling of digital tokens —these taxes are sure to impact the liquidity in the market and ensure that investors flee to other options such as
“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 recipients. 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,” added Dalmia.
Investors wouldn’t be able to set off losses in one cryptocurrency against gains in another, as per new rules. Clause (2)(b) of the section 115BBH of the Bill, prohibit investors from setting VDA losses against any other provision of the Act. If investors are to sell such assets before the current financial year 2021-22 ends, gains will be added to income and taxed at marginal applicable rates. The levy of income tax on crypto assets has been clarified in the 2022-23 Budget.
A 30% I-T, plus cess and surcharges, will be applied to such transactions in the same way that it is applied to horse racing winnings or other speculative transactions. In addition, no deduction for any expenditure (other than the cost of purchase) or allowance will be permitted when calculating the revenue from the transfer of VDA.
In addition, Union Budget 2022-23 suggested a 1% TDS on payments of virtual currency exceeding Rs 10,000 per year, as well as taxes on such presents in the hands of the recipient. For designated persons, such as individuals/HUFs who are required to have their accounts audited under the I-T Act, the TDS threshold limit would be Rs 50,000 per year.