Next Year’s IT Return Will Have Separate Column For Crypto Income

New Delhi: With the government announcing the introduction of a Digital Rupee in the fiscal year 2022-23, and a tax of 30 per cent on virtual assets, income tax return forms from next year will have a separate column for making disclosures on gains made from cryptocurrencies and paying taxes, Revenue Secretary Tarun Bajaj said on Wednesday.

Beginning April 1, the government will charge a 30 per cent tax plus cess and surcharges, on such transactions in the same manner as it treats winnings from horse races or other speculative transactions. Gains from cryptocurrencies were always taxable and what the Budget proposed is not a new tax but providing certainty over the issue, Bajaj told PTI.

“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 on its legality which would come out once the Bill (on regulating such assets) is introduced in Parliament,” he was quoted as saying.

How it will work

• A central bank-backed digital currency will start circulating in the next fiscal to usher in cheaper, more efficient currency management.
• The 30 per cent plus applicable cesses and surcharge of 15 per cent on income above Rs 50 lakh will have to be paid on income from cryptocurrencies
• Next year ITR form will show a separate column for crypto.

TDS

The Budget 2022-23 also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.

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.

Also, no deduction in respect of any expenditure or allowance shall be allowed while computing income from transactions in such assets. It has also specified that losses from the transfer of virtual digital assets will not be allowed to be set off against any other income.

No deduction has been allowed since cryptocurrencies and virtual digital assets do not have any economic value, except the underlying technology, Bajaj said.

Bajaj said currently some people are showing crypto gains as income and paying taxes, but some people are not doing it. With the TDS provision introduced, transaction information will reach the tax department automatically.

The crypto market in India grew 641 per cent in the year through June 2021, according to an October report by industry research firm Chainalysis.