How to report crypto income in an ITR?

Until last year, ITR forms used to be notified around April of the relevant assessment year, and ITR filing used to start by May/ June. This year with an aim to start ITR filing by the first day of the assessment year itself ITR Forms for AY 2023-24 have been rolled out by the Central Board of Direct Taxes (CBDT) on 15th February 2023.

In order to ensure streamlining of ITR filing, no major changes have been made in terms of filing ITR forms as compared to last year. We can say a step further towards ease of compliance. For AY 2023-24 the CBDT has notified Income Tax Return forms (ITR 1-6) and Income Tax verification forms (ITR V).

New Schedule introduced for Crypto

The government has introduced a new schedule to the ITR forms for reporting income from cryptocurrency or NFTs and other virtual digital assets (VDA).

As announced in Budget 2022, it is imposed that, income from the transfer of a virtual digital asset is subject to a 30% tax. No deductions are allowed in terms of expenses or allowances.

Crypto Losses cannot be Set Off

Crypto traders’ worst nightmare has come to reality. The government has clarified that the losses from VDA/crypto cannot be carried forward or set off against any income.

Thus, Loss from the transfer of VDA/crypto cannot be set off against profit from the same or other virtual digital assets.

Reporting of Income from Crypto in ITR

Now coming to the point of reporting income from crypto and other virtual digital assets, a separate schedule (Schedule VDA) is provided in these new ITR forms, in which taxpayers have to fill in details such as the,

  • Date of Acquisition/ Purchase

  • Date of Transfer/ Sale

  • Head under which income to be taxed (Capital Gains/Business Income)

  • Cost of Acquisition/ Purchase

    In the case of a gift, If you received crypto/VDA as a gift, you must provide details of the cost of acquisition as follows:

    As per section 56(2)(x) of the Income Tax Act, If you’re receiving crypto as a gift greater than the value of INR 50,000 from a non-relative then the entire amount is taxable.

    a) Enter the amount on which tax is paid under section 56(2)(x) if any - It means, let’s say if you have received bitcoins as a gift worth ₹60,000 from your friends, then in such a case, the entire amount shall be taxable as IFOS.

    If a taxpayer has received cryptocurrency as a gift either of value below ₹50,000 or of value more than ₹50,000 from a relative as per the IT act. And the below point is applicable under schedule VDA.

    b) In any other cases cost to the previous owner has to be entered.

  • Sales Consideration received

  • Income from transfer of virtual digital assets (enter nil in case of loss).

Let’s understand with an Example:

An individual Hitesh aged 28 years has a taxable salary income of ₹8 lakhs and is also involved in crypto trading. He had made some transactions from Crypto Exchange as mentioned below.

What would be his tax liability for AY 2023-24 under the old tax regime?

Schedule VDA - Income from transfer of virtual digital asset

Solution: Following is the total taxable income of Hitesh for FY 2022-23 (AY 2023-24).

Income from salary - ₹8,00,000

Income from capital gain (Crypto) - ₹3,75,000

Tax Liability at Slab Rate - ₹72,500 (₹12,500+₹60,000)

Tax Liability at Special Rate - ₹1,12,500 (30% of ₹3,75,000)

1% TDS

Now from this FY 2022-23, while filing ITR, the TDS deducted shall be reported under the tax credits as at the time of the transfer of virtual digital assets TDS would have been deducted at 1% under section 194S if the aggregate amount exceeds the specified limits.

No Common ITR Form

There’s no announcement made related to the common ITR Forms proposed in budget 2023, It is assumed that the implications of common ITR Forms will be from FY 2023-24 & AY 2024-25.

4 Likes

Hey, I am using the e-filing feature provided by Quicko, I only have 2 crypto transactions and I want to report those under Capital Gains.

Under, Incomes → Capital Gains → Add → Add Trades Manually
It clearly mentions that “report your crypto taxes here.” , but still when I am trying to report it, which “Asset Type” should I select for mentioning Crypto transactions?

Hi @Amritansh_k

Currently, we are not supporting crypto income in our platform, our team is working on it to enable the functionality.

However, we offer an alternative option called expert assistance, where you can Book a MEET and connect with one of our tax experts who will guide you to report the crypto transactions and filing the ITR.

Hi

I trade crypto perpetual futures on the binance platform. I understand that in the traditional world, when trading derivatives, we can treat that operation like a business because we are trading the derivatives of the underlying asset and not the actual asset itself.

I know that a similar rule is applicable for crypto as well and for this reason we don’t have to pay the TDS of 1% on crypto derivatives trading transactions. Is my understanding correct?

Does that also mean that we can offset the losses against profits in crypto derivatives trading, since it basically qualifies as a business? Meaning we only have to pay 30% + 4% tax on (profits - losses) from crypto derivatives trading.

Also, does quicko support tax accounting for crypto derivatives trading transactions?

Prompt responses from people familiar with the crypto tax rules would be really helpful.
Thanks

Hi @Muskan_Balar @Shrutika_Shah
these rules are for spot crypto trading. I am specifically asking about crypto derivatives. can we not present crypto derivatives trading as a business and offset the losses against profits?

can someone from the tax qna team please answer my query?

everywhere I see tax rules for crypto they are about trading the actual underlying crypto assets (i.e. spot trading). tax rules about trading crypto derivatives (futures and options) are not mentioned anywhere.

even the above article about crypto income by @Muskan_Balar seems to be about spot trading and doesn’t mention anything about crypto futures and options.

thanks

Hi @yasharma02

As per Indian law, a TDS of 1% is levied on all crypto sale transactions.

No, crypto losses cannot be set off against crypto profits for trading.
You can read about Tax on Cryptocurrency, NFT & VDA (Virtual Digital Asset) - Learn by Quicko

The Quicko DIY product does not as of now support the taxation of crypto. However, you can book a MEET, where you can connect with a tax expert who will help you file your return along with crypto income/loss.

Thanks for the response @Shrutika_Shah
I understand what you are saying and I also read the article that you mentioned. But my question regarding treating it as a business activity still remains unsolved.

In the article it is mentioned that “As per Section 2(47)(A) of the Income Tax Act, a Virtual Digital Asset (VDA) includes cryptocurrency, Non-Fungible Tokens (NFTs), and any other digital asset notified by the central government in the official gazette.”

This does not say anything about the derivatives of VDA i.e. futures and options. That’s why I am still confused around it.

Based on treatment of futures and options in traditional markets (equity, forex, commodities), trading of derivatives can be treated as a business and therefore losses can be offset against profits.

My question is does this rule apply to derivatives of VDA as well?

I have a question:

  1. I buy Crypto (VDA) from CoinDCX Exchange. I buy using INR. (they don’t deduct TDS) but if i sell the same crypto on their website, they deduct TDS, but i am not selling the purchased Crypto on their website. Instead I transfer it to my Wallet and then sell it to some individual.

  2. Now suppose i transfer the Crypto purchased from CoinDCX exchange and sell it to some XYZ person using P2P method i.e. Person to Person, so the Buyer has to deduct TDS? Or I have to deduct TDS? The amount range is between 1000₹ to 100000₹

So in this case i have to deduct TDS or the Buyer will deduct? Thanks

Hi @_S_Batra

The buyer has to deduct the TDS from the sales consideration given to you.

Hi @yasharma02

Yes, VDA can be treated as business income, if you hold the VDA for sale in the regular course of business.
However, as per the law, loss from VDAs cannot be set off against any other income.

Hope this helps.

Can someone please confirm if we need to file ITR for crypto transactions done before April 1 2022. TIA.

Hi @Surenwiz93

You’re required to report all the crypto transactions in Schedule VDA from 1 April 2022 to March 31 2023 while filing for FY 2022-23/AY 2023-24.

Thanks. Do we need to record the transactions done before April 1 2022 in ITR portal for previous Assessment year then or there is no need to record those details anywhere ? Apologies for being a novice.

Hi @Surenwiz93

Any crypto transactions before April 2022 were to be reported while filing for FY 2021-22/AY 2022-23.

Hence. previous AY’s crypto need not be reported in this year’s filing.

When is Quicko team planing to introduce crypto filing ? will it be ready by next year ?

Hi @jaycyborg

We are working on the same and planning to go live with it soon.

if the person has is NIL income in the year except the income of Rs.2 lakhs in crypto trading

do the person still needs to pay tax @30% ?

@Shrutika_Shah
@Bharti_Vasvani
@Muskan_Balar

Hey @HIREiN,

Yes, the income from crypto trading will taxed at flat 30%.

yes . but the tax has to be paid even though the total income is less then 2.50 lakhs in the year ?