Over the years, digital assets like cryptocurrencies and NFTs have gained immense popularity, and many have started to try their luck investing in these.
Now, earlier, the tax laws for these assets were quite hazy in India. However, with increasing participation of investors, the government introduced new sections for the taxation of cryptocurrencies or any virtual digital asset for that matter.
What is the tax rate for cryptocurrencies?
Compared to other asset classes, where your tax rates depend on whether the gains are short-term or long-term, for cryptocurrencies, a flat 30% tax is levied. So, if you have profits of â‚ą1L, the tax liability would be â‚ą30,000.
Moreover, a 1% TDS is deducted whenever you sell crypto, and this applies to the total sale value, not just the gains. Even if you sell at a loss, the 1% TDS still applies.
Are crypto profits treated as capital gains or business income?
Just like stocks, the reporting of digital assets is also based on intent. You need to declare them as capital gains if they are held as investments. If crypto/NFTs are held for trading purposes, then the income is considered business income. However, regardless of how you choose to report them, the tax rate will remain the same at 30%.
Can I claim any deductions?
No, none of the deductions, including the basic exemption, are allowed when you have income from crypto. However, you do get a rebate up to â‚ą25,000 on the tax liability.
Can I carry forward crypto losses?
Unfortunately, unlike other assets, you cannot carry forward your losses from digital assets. Additionally, you can’t offset crypto losses against any other income in the same year. Further, losses under any other income head cannot be set off against income from digital assets.
How do I report crypto income in the ITR?
In 2022, Schedule VDA (Virtual Digital Asset) was introduced to facilitate reporting of income from digital assets like crypto and NFTs.
Here, you’ll have to fill in details like:
- Date of acquisition/purchase
- Date of transfer/Sale
- Income head under which you want to report (Capital Gains/Business Income)
- Cost of acquisition
- Sales consideration received
- Income from the transfer of virtual digital assets (enter nil in case of loss)
Once you enter all these details, the tax will be calculated at a special rate of 30%. As mentioned, you will not be able to claim any deductions or expenses in the case of crypto income.
Will the tax liability change based on which regime I opt for?
No, for incomes that are charged at special rates, the selection of the regime will not make a difference in your tax liability.
If you have any doubts, ask 'em below.