TAX ON CRYPTOCURRENCY IN INDIA
HOW MUCH TAX ON
CRYPTOCURRENCY INCOME IN INDIA ?
WHAT IS TDS ON CRYPTOCURRENCY TRANSACTIONS ?
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TAX ON CRYPTOCURRENCY TRANSACTIONS IN INDIA
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CRYPTOCURRENCY TAX IN INDIA
UNION BUDGET 2022 AND CRYPTOCURRENCY TAX IN INDIA :
In the budget speech delivered on 1st , February 2022 , Finance Minister Smt Nirmala Sitharaman introduced the concept of tax on cryptocurrency in India by saying :
" There has been a phenomenal increase in transactions in virtual digital assets. 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. No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient. "
The speech didn't elaborate on what constitutes a Virtual Digital Asset .
In the budget speech delivered on 1st , February 2022 , Finance Minister Smt Nirmala Sitharaman introduced the concept of tax on cryptocurrency in India by saying :
" There has been a phenomenal increase in transactions in virtual digital assets. 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. No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient. "
The speech didn't elaborate on what constitutes a Virtual Digital Asset .
What are Virtual Digital asset ?
As per Section 2 (47a) of the income Tax Act , "virtual digital asset" means--
(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;
(b) a non-fungible token or any other token of similar nature, by whatever name called;
(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:
Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of virtual digital asset subject to such conditions as may be specified therein.
Explanation.—For the purposes of this clause,--
(a) "non-fungible token" means such digital asset as the Central Government may, by notification in the Official Gazette, specify;
(b) the expressions "currency", "foreign currency" and "Indian currency" shall have the same meanings as respectively assigned to them in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);]
DIGITAL ASSETS NOT CONSIDERED AS VDA : ( CBDT Notification dated 30.06.2022 )
However the following virtual digital assets shall be excluded from the definition of virtual digital asset:
(i) Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;
(ii) Mileage points, reward points or loyalty card, being a record given without direct monetary
consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;
(iii) Subscription to websites or platforms or application
(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;
(b) a non-fungible token or any other token of similar nature, by whatever name called;
(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:
Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of virtual digital asset subject to such conditions as may be specified therein.
Explanation.—For the purposes of this clause,--
(a) "non-fungible token" means such digital asset as the Central Government may, by notification in the Official Gazette, specify;
(b) the expressions "currency", "foreign currency" and "Indian currency" shall have the same meanings as respectively assigned to them in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);]
DIGITAL ASSETS NOT CONSIDERED AS VDA : ( CBDT Notification dated 30.06.2022 )
However the following virtual digital assets shall be excluded from the definition of virtual digital asset:
(i) Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;
(ii) Mileage points, reward points or loyalty card, being a record given without direct monetary
consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;
(iii) Subscription to websites or platforms or application
INCOME TAX RATES ON CRYPTOCURRENCY INCOME
As per section 115BBH of Income Tax Act ,
(1) Where the total income of an assessee includes any income from the transfer of any Virtual Digital Asset ( VDA ) , the income-tax payable shall be the aggregate of--
(a) the amount of income-tax calculated on the income from transfer of such VDA at the rate of 30 % ; and
(b) the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a).
(2) Notwithstanding anything contained in any other provision of this Act,--
(a) no deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act .
(b) no set off of loss from transfer of the virtual digital asset computed under clause (a) of sub-section (1) shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years.
(3) For the purposes of this section, the word "transfer" as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not.
(1) Where the total income of an assessee includes any income from the transfer of any Virtual Digital Asset ( VDA ) , the income-tax payable shall be the aggregate of--
(a) the amount of income-tax calculated on the income from transfer of such VDA at the rate of 30 % ; and
(b) the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a).
(2) Notwithstanding anything contained in any other provision of this Act,--
(a) no deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act .
(b) no set off of loss from transfer of the virtual digital asset computed under clause (a) of sub-section (1) shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years.
(3) For the purposes of this section, the word "transfer" as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not.
TDS ON CRYPTOCURRENCY TRANSACTIONS
TDS ON VIRTUAL DIGITAL ASSET FROM 1ST, JULY 2022 :
credit card reward points , mileage cards etc exempted
Dated 02.07. 2022 : Finance Act, 2022 inserted a new section 194S in the Act with effect from 1st July 2022. The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1% of such sum as income tax thereon. The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier.
CUT-OFF LIMIT :
However TDS is not required to be made in the following cases:-
(i) the consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed Rs 50,000 during the financial year; or
(ii) the consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed ten thousand rupees during the financial year.
To read original notifications ,
Check CBDT Notification dated 30.06.2022 and Dated 28.06.2022
What is Section 194S of Income Tax Act 1961 ?
Payment on transfer of virtual digital asset : SECTION 194S OF INCOME TAX ACT
194S. (1) Any person responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset, shall, at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon:
Provided that in a case where the consideration for transfer of virtual digital asset is--
(a) wholly in kind or in exchange of another virtual digital asset, where there is no part in cash; or
(b) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer,
the person responsible for paying such consideration shall, before releasing the consideration, ensure that tax required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset.
(2) The provisions of sections 203A and 206AB shall not apply to a specified person.
(3) Notwithstanding anything contained in sub-section (1), no tax shall be deducted in a case, where--
(a) the consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed fifty thousand rupees during the financial year; or
(b) the consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed ten thousand rupees during the financial year.
(4) Notwithstanding anything contained in section 194-O, in case of a transaction to which the provisions of the said section are also applicable along with the provisions of this section, then, tax shall be deducted under sub-section (1).
(5) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense Account" or by any other name, in the books of account of the person liable to pay such sum, such credit of the sum shall be deemed to be the credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.
(6) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the prior approval of the Central Government, issue guidelines for the purposes of removing the difficulty.
(7) Every guideline issued by the Board under sub-section (6) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person responsible for paying the consideration on transfer of such virtual digital asset.
Explanation.—For the purposes of this section "specified person" means a person,--
(a) being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
(b) being an individual or a Hindu undivided family, not having any income under the head "Profits and gains of business or profession".]
194S. (1) Any person responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset, shall, at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon:
Provided that in a case where the consideration for transfer of virtual digital asset is--
(a) wholly in kind or in exchange of another virtual digital asset, where there is no part in cash; or
(b) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer,
the person responsible for paying such consideration shall, before releasing the consideration, ensure that tax required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset.
(2) The provisions of sections 203A and 206AB shall not apply to a specified person.
(3) Notwithstanding anything contained in sub-section (1), no tax shall be deducted in a case, where--
(a) the consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed fifty thousand rupees during the financial year; or
(b) the consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed ten thousand rupees during the financial year.
(4) Notwithstanding anything contained in section 194-O, in case of a transaction to which the provisions of the said section are also applicable along with the provisions of this section, then, tax shall be deducted under sub-section (1).
(5) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense Account" or by any other name, in the books of account of the person liable to pay such sum, such credit of the sum shall be deemed to be the credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.
(6) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the prior approval of the Central Government, issue guidelines for the purposes of removing the difficulty.
(7) Every guideline issued by the Board under sub-section (6) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person responsible for paying the consideration on transfer of such virtual digital asset.
Explanation.—For the purposes of this section "specified person" means a person,--
(a) being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
(b) being an individual or a Hindu undivided family, not having any income under the head "Profits and gains of business or profession".]
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FOR AUTHENTIC INFORMATION AND TIPS ON INCOME TAX MATTERS
Income tax dept of Govt of India has a very useful portal which churns out valuable guidance for tax payers .One can go through and understand the basics .
Link to the portal is http://india.gov.in/spotlight/filing-income-tax-returns#itr2
Further there are practical tips for computing tax which can be read and used .For example, the link how to compute other income. One can make use of the portal in understanding law, making payment and also to file returns .
Link to the portal is http://india.gov.in/spotlight/filing-income-tax-returns#itr2
Further there are practical tips for computing tax which can be read and used .For example, the link how to compute other income. One can make use of the portal in understanding law, making payment and also to file returns .
