The Indian bitcoin community eagerly sought clarification on the tax on cryptocurrencies. The administration has made announcements about tax standards for Budget 2022. The following are important details about income tax consequences for cryptocurrencies in India:
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What does cryptocurrency mean under income tax regulations?
It is a type of virtual digital asset that, in accordance with the provisions of the Foreign Exchange Management Act of 1999, is neither an Indian currency nor a foreign currency. It also serves as a unit of account and a store of wealth. It may be traded, transmitted, or stored electronically.
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Virtual digital asset classification
According to the Finance Bill of 2022, cryptocurrency transactions would result in revenue under the head of capital gain because they are categorized as capital assets for taxation purposes.
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Tax on cryptocurrency income (Section 115 BBH)
Taxes on cryptocurrency transfer income will be levied at a 30% rate. No deductions will be permitted for any expenses other than purchase costs. Losses cannot be carried forward or set against any type of income. Likewise, losses cannot be set off against future income.
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The TDS provisions [Section 194S]’ applicability
With effect from July 1, 2022, a new section 194S regulating TDS is intended to be added to The Income Tax Act, 1961.
Deductor:
A person who must pay any amount as payment in exchange for the transfer of bitcoin. If an amount is payable to a resident individual, tax must be subtracted. TDS rate: 1% of the total consideration When to deduct: As soon as the resident receives payment or the amount is credited to their account, whichever comes first.
- If consideration is payable by any person (other than a specified person) and its total value does not exceed Rs. 10,000 throughout the financial year, the consideration is exempt from TDS.
- If payment is due from a specific party and the total amount is less than or equal to Rs. 50,000 in the fiscal year
The definition of “specified person”
A person or HUF whose total sales, gross receipts during the fiscal year immediately preceding the fiscal year in which such virtual digital asset is transferred do not exceed Rs. 1 crore in the case of business or Rs. 50 lakh in the case of a profession A person or HUF that receives no income under “earnings and gains from business or profession”
GST and cryptocurrencies (Goods and Services Tax)
The government has not yet addressed the issue of whether cryptocurrencies are subject to taxation under the Goods and Services Act. Let’s discuss its GST classification.
If Bitcoin is to be considered “money” for the purposes of GST?
It appears to be money when looking at its features, such as store of value and unit of account. However, according to the CGST Act of 2017, “money” only refers to legal tender or foreign currency accepted by the RBI. As such, since it does not meet these requirements, it will not be regarded as money.
If Cryptocurrencies are to be categorized under the GST as “Securities”?
Securities are defined by The CGST Act, 2017 to have the same meaning as that given to them by The Securities Contracts (Regulation) Act, 1956. Following a review of that definition as well, it is determined that cryptocurrencies do not fall within the category of “securities.”
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