Revenue Secretary Tarun Bajaj has informed that from next year Income Tax Return (ITR) form will have a separate column to report income from crypto and other virtual digital assets (VDAs).
As per the Budget 2022, the government will tax income from Crypto and VDAs at a flat rate of 30% plus cess and surcharges of 15% on income above Rs 50 lakh from cryptocurrencies. Income from crypto and other VDAs received as gifts, even airdropped gifts will be liable to tax.
Further, no deduction or allowance will be allowed for any expenditure while computing income from transactions in crypto or other VDAs. Losses from such assets cannot be set off against any other income from other sources.
In this regard Bajaj quoted, “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.”
However, the Government is still preparing a Bill to regularise cryptocurrency transactions and exchanges. No draft of the proposed bill is in the public domain. Even as 30% tax on income from crypto and other VDAs has been announced, investors should not think that crypto has been legalized as an asset class, according to Finance Minister.
Beside, 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 a 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 1st July, 2022 while the gains will be taxed from 1st April, 2022.