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Income Tax Return for FY 2022-23: New column in ITR Form from next year – 5 points

Income Tax Return For FY 2022-23: ITR Form will have a separate column from next year to help taxpayers report their income from crypto and other virtual digital assets (VDAs)

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Income Tax Return For Cryptocurrency, NFT Income in FY 2022-23: ITR Form will have a separate column from next year to help taxpayers report their income from crypto and other virtual digital assets (VDAs), according to Revenue Secretary Tarun Bajaj.

As per Budget 2022-23, the Central Government will tax income from VDAs at a flat rate of 30% plus cess and surcharges. The tax treatment of income from crypto and other VDAs would be similar to other speculative transactions like horse races. No deduction or allowance will be allowed for any expenditure while computing income from transactions in crypto or other VDAs. Losses from such assets can not be set off against any other income from other sources. 

According to Bajaj, deduction has been allowed because VDAs do not have any “economic value” except the underlying technology. “So, what we are also saying is that since it doesn’t have economic value, we will not allow set-off of losses or carry off loses,” Bajaj was quoted as saying by PTI. 

Here are five points crypto investors in India need to know:  

1. Tax on cryptocurrency not new but will bring certainty

According to Bajaj, income from crypto and other VDAs was always taxable. As taxpayers are required to report income from all possible sources while filing ITR. 

However, Budget 2022 has brought certainty to the issue. “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,” Bajaj was quoted as saying. (Read his statement here)

ALSO READ | Cryptocurrency Tax Calculation: What will be Taxed, What won’t, How and When?

2. Cryptocurrency Bill under progress

The Government is still preparing a Bill to regularise cryptocurrency transactions and exchanges. However, no draft of the proposed bill is in the public domain. 

3. Cryptocurrency has not yet been legalised in India

Even as 30% tax on income from crypto and other VDAs has been announced, investors should not think that crypto has been legalised as an asset class, according to Finance Minister Nirmala Sitharaman (Read her statement here). 

The legalisation of crypto and other VDAs like NFTs may or may not happen through the upcoming Bill. Hence, investors should ideally wait for the legislation before making any decision.

3. TDS on cryptocurrency, NFT transfers and payments

Meanwhile, the Government has proposed 1% TDS on crypto transfers/payments towards virtual currencies beyond Rs 10,000 in a year.  The threshold limit for TDS would be Rs 50,000.year for specified persons, including individuals/HUFs who are required to get their accounts audited under the Income Tax Act. 

The TDS provision will come into effect from July 1, 2022 while the gains will be taxed from April 1.  

4. New column in ITR Form

A new column will be inserted in the ITR Forms for reporting gains from cryptocurrencies and other VDAs, according to Bajaj.

5. Crypto and other VDA gifts to be taxed too; surcharge of 15% on income above Rs 50 lakh

As per Budget 2022, you will have to pay tax on income from crypto and other VDAs received as gifts. Even airdropped gifts will be liable to tax. Apart from 30% tax, there will be a surcharge of 15% on income above Rs 50 lakh from cryptocurrencies, according to Bajaj. 

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