Next year’s tax return forms will have a separate column for disclosing gains made from cryptocurrencies and paying taxes, Revenue Secretary Tarun Bajaj said on Wednesday.
From April 1, the government will levy a tax of 30% plus tax and surcharges on such transactions in the same way it treats winnings from horse racing or other speculative transactions.
In an interview with PTI, Bajaj said gains from cryptocurrencies are still taxable and what the budget proposes is not a new tax but provides certainty on the matter.
“The provision of the finance bill is related to the taxation of virtual digital assets. It aims to bring certainty in the taxation of cryptocurrencies. It does not convey anything about its legality which would come out once the bill (on regulation of these assets) presented to Parliament,” he said.
The government is working on legislation to regulate cryptocurrencies, but no plans have yet been made public.
Meanwhile, a central bank-backed digital currency will begin circulating in the next fiscal year to usher in cheaper and more efficient currency management.
The 30% plus applicable fees and 15% surcharge on income above Rs 50 lakh will have to be paid on cryptocurrency income, he said adding that the tax return form of the next year will have a separate column for reporting crypto earnings.
“Next year, the ITR form will show a separate column for crypto. Yes, you will have to disclose,” he said.
The launch of the “digital rupee” by RBI as well as a 30% tax from April 1 on profits from transactions of digital assets, including cryptocurrencies and non-fungible tokens (NFTs) have been announced by Finance Minister Nirmala Sitharaman in her budget speech on Tuesday. , as the country keeps pace with the global shift towards virtual financial instruments.
“The government has been very clear that they need to push for a tax on income from crypto assets, so we introduced the maximum rate and levied 30%, with a surcharge applicable. We also introduced the TDS, so we will now follow the transactions,” Bajaj said.
The 2022-23 budget also proposed a 1% TDS on payments to virtual currencies in excess of Rs 10,000 per year and the taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 per annum for specified persons, which includes individuals/HUFs who are required to have their accounts audited under the Information Technology Act.
The 1% TDS provisions will come into effect on July 1, 2022, while winnings will be taxed from April 1.
Further, no deduction in respect of any expense or allowance will be allowed when computing income from transactions in such assets. He also clarified that losses resulting from the transfer of virtual digital assets cannot be compensated by any other income.
No deductions were allowed because cryptocurrencies and virtual digital assets have no economic value except for the underlying technology, Bajaj said.
India’s crypto market is up 641% in the year to June 2021, according to an October report from industry research firm Chainalysis.
“It was still taxable, I’m not saying it’s not a new tax, I’m bringing tax certainty. Now if you show the crypto in the ITR form, you’ll have a separate primary crypto and it will charge you 30% tax,” he said, adding that the message behind the budget announcement is that crypto is taxable.
Earnings from crypto are subject to income tax even now, Bajaj said, adding that the valuation agent will assess the ITR based on the crypto earnings that the assessee showed.
“If someone says it’s a long-term capital gains tax (LTCG), they can say no, it’s not an LTCG tax, it’s business income and therefore liable to a tax of 30%,” he said.
Regarding the taxation of cryptocurrency before April 1, 2022, Bajaj said: “For transactions before April 1, you will show it in a header in your ITR and the assessment officer will make an assessment for you”.
Giving an example, he said that the actual trading of the derivative is not considered an investment or a capital gain, but is treated as business income.
“The valuation agent will take a call on what major crypto gains should be charged,” the secretary said.
Bajaj said that the new currency that RBI will bring will also have the underlying blockchain technology.
“So what we’re also saying is that since it has no economic value, we won’t allow loss offsetting or loss carry-forward.”
Bajaj said that currently some people are posting crypto earnings as income and paying taxes, but some people are not. With the introduction of the TDS provision, transaction information will automatically flow to the tax department.