Crypto Tax Filing India Guide FY 2022-2023: Tax Implications, Rules, Date, Key Points – Explained

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Crypto Tax Filing India 2022: The 2022 Union Budget proposed to classify cryptos as Virtual Digital Assets (VDAs). Even though crypto has been specified as an asset, the tax treatment is not like other assets. Under the new crypto tax rule, an individual must pay a 30% flat tax on income derived from the transfer of cryptocurrencies and other virtual digital assets, including NFTs.

According to Archit Gupta, Founder and CEO of Clear (formerly Cleartax), the taxpayer is not entitled to any deduction from the sale price of the crypto asset except for the cost of acquisition. The government recently clarified that mining infrastructure costs will not be included in the calculation of the cost of acquisition.

Crypto Tax Rule: No Loss Compensation Allowed

Intra-head loss adjustment, i.e. offsetting losses resulting from one VDA against income from another VDA, is not permitted. Explaining this with an example, Gupta said that if you have a loss from the transfer of Bitcoin and you have profited from the transfer of NFT, you cannot eliminate the loss of Bitcoin from the profits on the transfer of NFT. You will have to pay a flat tax of 30% on the profits of the NFT transfer.

Also, losses due to crypto transfer cannot be deducted from income under any other heading. This means that gains from the sale of stocks, mutual funds, assets such as property, etc., will not be able to be offset by a loss of crypto.

Crypto tax rule: no deferral allowed

The Crypto Tax Law states that the taxpayer cannot carry forward cryptocurrency losses.

“If you have a loss from transferring crypto in one fiscal year, it cannot be carried over to the next year to offset future gains,” Gupta told FE Online.

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Crypto tax filing date: When will you have to pay 30% crypto tax?

The taxpayer will have to pay a 30% tax on cryptocurrency and other VDAs starting in the 2023-24 assessment year. This means that all of your income from the ARV transfer during the 2022-23 fiscal year will be taxed at the rate of 30%.

Gupta suggested that crypto investors should calculate their withholding tax after taking into account income tax from transferring crypto and NFTs and pay tax installments accordingly.

Tax on crypto exchange in business transactions

The government has made it clear that virtual digital assets (VDAs) are not currencies.

“However, the term “transfer” is not defined in relation to virtual digital assets as it is defined for capital assets in the Income Tax Act. The law needs to clarify what ‘transfer’ means and whether it covers transactions where goods or services are purchased for crypto,” Gupta said.

“If the law clarifies the consideration of such transactions within the definition of ‘transfer’, then the TDS provision will apply here,” he added. In this case, a person transferring the crypto will have to deduct the TDS because a transfer has taken place. Such an event will be taxable in the hands of whoever is transferring the crypto.

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In addition, the company will be required to report receipts based on the value (FMV) of the crypto accepted in return for the provision of goods or services. If the company sells or transfers these cryptos in any way, again, a crypto transfer event will occur and tax will have to be paid on this transfer.

Tax on Crypto/NFT Airdrops or Gaming Coins

Crypto and NFT companies often use airdrops to promote their project launch. Airdrops are similar to receiving a voucher with a discount code in your email.

“These crypto drops or coins earned through gambling may be considered gifts within the meaning of the Income Tax Act, and such gifts are taxable in the hands of the recipient,” Gupta said.

Tax on crypto received as a gift

The government has also expanded the definition of Specified Movable Property to include virtual digital property. Thus, gifts received in the form of crypto-assets would be taxable if the fair market value exceeds the threshold limit of Rs 50,000.

However, Gupta said that simply reading the crypto tax provisions indicates that the gift received from relatives or on specific occasions will be exempt from tax.

(Cryptos and other virtual digital assets are unregulated in India. They are considered extremely risky for investment. Please consult your financial advisor before making any investment decision)

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