Crypto Tax: How to report it while filing ITR, what will be taxed and what not? Expert answers

Crypto is back on the discussion table while all the investors have been seemingly curious regarding various aspects of taxation on crypto. Here are the answers to all your questions.

New Delhi: Finance Minister Nirmala Sitharaman had announced in her Budget 2022 speech that only RBI-issued 'Digital Rupee' will be recognised as currency, and the government will levy a 30 percent tax on gains made from any other private digital asset from April 1.

Immediately after the Budget announcement, Crypto is back on the discussion table while all the investors have been seemingly curious regarding various aspects of taxation on crypto.

Sujit Bangar, Founder TaxBuddy.com in an exclusive interview with Reema Sharma of Zee Media answered all the frequently asked questions on crypto taxation.

One of the most important question being asked by investors of crypto is that whether the same (crypto asset) should be reported while filing of Income Tax Return or not. Can you shed light on it?

Correct. The most important question about crypto taxation is whether to report Bitcoin/crypto asset while filing ITR. Cryptos purchased from exchanges based in India cannot be considered as foreign asset. Therefore, normal provisions like holding of any other asset would be applicable. Therefore, till your total income is less than Rs 50Lakh, don’t worry, you need not report it in ITR.

Then, when should one report crypto in ITR filing? 

If your total income crosses Rs 50 Lakh, then you need to file ITR-2 and show the bitcoin or other types of cryptos as asset in the schedule Sch-AL of ITR-2.

If you have purchased cryptocurrency from abroad or through exchanges/intermediary based outside India, your crypto holdings would be considered as foreign asset and you need to report in ITR even if your total income is less than Rs 50 Lakh. 

Obviously, you need to report income on sell of crypto assets and as per recent budget updates, it would be taxed at 30% from next financial year onwards. 

Will there be any deductions or exemptions apart from cost of acquisition of Crypto?

While calculating this income, no deductions or exemptions will be allowed apart from cost of acquisition of Crypto. In other words, no basic income tax exemption limit of Rs 2.5 Lakh would be applicable here. Your income from crypto would be taxed from the very first rupee. For example, if your gain from crypto is Rs 30,000 and you don’t have any other income, you will still need to pay tax at 30% on this Rs 30,000 even if your income is below basic exemption limit. No losses can be carried forward and no set-offs will be allowed with respect to other sources of income. The losses or Profits can be only set-off against Digital assets’ profit/loss in that Financial year. 

What about tax on Crypto if it has been a gift?

Crypto as a gift will be taxed in the hands of the recipient. Moreover, there would be TDS at 1% whenever you sell these assets. For example, if you see, crypto assets at Rs 1,000,00 , then TDS would be Rs 1000 and you will get Rs 99,000. One need not worry as credit for this TDS can be claimed while filing ITR.