Moving along the process to levy tax on profits earned by trading in cryptocurrencies, the income tax forms set to get amended from next year onwards. On February 1, Union Finance Minister Nirmala Sitharaman announced that the transfer of virtual assets will be taxed at a flat rate of 30 percent.
Soon after the announcement, Union Revenue Secretary Tarun Bajaj clarified that the tax form will have a column to record the gains.
Separate column in forms
He confirmed that the income tax forms next year will have separate column for making disclosures on gains made from cryptocurrencies and paying taxes.
“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,” he said.
Next year ITR form will show a separate column for crypto. “Yes, you will have to disclose,” said Bajaj.
Aside from taxing at 30 percent, there are other provisions relating to taxation of digital currencies that were introduced in the Budget 2022. One, loss from virtual currencies cannot be set off against any other income. Second, if it is given as a gift, it will be taxed in the hands of the recipient.
“The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent,” the FM had said in her budget speech.
TDS on large payments
Not only on gains but huge payments made in cryptocurrencies above a threshold will now draw a TDS of one percent. Although the proposed taxation of digital currencies has unnerved several keen crypto investors, it is seen as a move to curb relentless euphoria around crypto trading.
Some experts argue that the maximum tax slab of 30 percent is a move to dissuade crypto trading — which has been growing at a mind-numbing pace.
So, if you are a regular crypto investor, be prepared to keep a record of all gains made in the fiscal 2022-2023 — a special column in the tax form will await those details.