Income tax return forms from next year will have a separate column for disclosing gains made from cryptocurrencies and paying taxes, Revenue Secretary Tarun Bajaj has said on Wednesday.
From April 1 the government will charge a 30% tax and also cess and surcharges, on such transactions in the same manner that it treats winnings from horse races or other such speculative transactions.
In an interview with PTI, Bajaj has said gains from cryptocurrencies have always been taxable and what the Budget proposed does not have a new tax but provides more certainty over the issue.
“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 the regulation of such assets) is introduced in Parliament,” he said.
The government has been working on legislation to regulate cryptocurrencies, however no drafts have been released publicly.
Central bank will release a digital currency
A central bank-backed digital currency is going to start circulating in the next fiscal year so the process becomes cheaper, and we will have more efficient currency management.
The 30% plus applicable cesses and surcharge of 15% on income above Rs. 50 lakh will be paid on income from cryptocurrencies. “Next year ITR form will show a separate column for crypto. Yes, you will have to disclose,” he said.
The news of the launch of the ‘Digital Rupee’ by RBI and 30% tax from April 1 on profits from digital asset transactions, including cryptocurrencies and non-fungible tokens (NFTs) was announced by Finance Minister Nirmala Sitharaman in her budget speech on Tuesday, as India needs to keep progressing with the global move toward virtual financial instruments.
No deductions or allowances will be made
No deduction with respect to any expenditure or allowance will be allowed while computing the income from the transactions in such assets. It has also specified that losses from the transfer of virtual digital assets will not be allowed to be set off against any other income.
Such deductions have not been allowed since cryptocurrencies and virtual digital assets do not have any economic value, except for the underlying technology, Bajaj said.
The crypto market in India grew 641% in a year from June 2021, according to an October report by industry research firm Chainalysis.
Crypto gains have always income tax chargeable
“It was always taxable, I am not saying it’s not a new tax, I’m bringing certainty in tax. Now if you show crypto in the ITR form, you will have separate head crypto and it will charge you 30 per cent tax,” he said, adding that the clear message behind the Budget announcement is that crypto is taxable.
Gains from crypto are chargeable to income tax even at present, Bajaj said, adding that the Assessing Officer will assess the ITR based on crypto income that the assessee has shown. “If somebody says it’s a long-term capital gains tax (LTCG), he may say no it’s not LTCG tax, it is a business income and hence liable to 30 per cent tax,” he said.
In regards to taxability of cryptocurrency prior to April 1, 2022, Bajaj said, “For transactions before April 1 you will show some head in your ITR and the Assessing Officer will do an assessment for you”. Giving an example, he said that currently trading in the derivative has not been not considered as investment or capital gain but is treated as business income. “The Assessing Officer will take a call on what head crypto gains should be charged,” the Secretary said.
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