As March 31st, 2023 is nearing, it’s time for everyone to start wrapping up their record books, calculating the tax obligations, and figuring out strategies to minimize the total payable tax. Also, this year will be the first time taxpayers will see a major change in their Income Tax Return forms (ITR), where a whole new section for cryptocurrencies will be odishadiscoms available. Yes, finally after much debate, discussions, suspicions, distrusts, confusion, changes in policies, and fear for more than 7-8 years among the community investing in cryptocurrencies about the government’s stance on these newly emerging financial assets like Bitcoin and Ethereum, finally the Government of India took a mixed stance on the notion of cryptocurrencies by introducing the sub-section of 115BB (H) called Virtual Digital Assets Taxation Scheme under the Income Tax Act – 1995.
This policy change has received mixed reactions from the public. On one hand where there were memes initially flooding the internet with captions like the government saying: “Your profit is my profit! Your loss is your loss!”, on the other hand, the launching of the Central Bank Digital Currency (CBDC) received much appreciation in the secondary market and a very good response in the retail market as well. There are several parameters and definitions related to this crypto tax India policy that you need to understand to prepare yourself and your record books for the March 31st, 2023 Financial Year closing, So let us get you geared up for the day and start explaining the vocabulary and making the policies around them a little more clear.
How is the notion of Virtual Digital Asset defined?
The notion of Virtual Digital Assets (VDAs) defined under Section 2(47A) of the Act incorporates all modern forms of blockchain-based tokens, which include Cryptocurrencies, Non-Fungible Tokens (NFTs), and any other form of code or cryptic tokens of similar nature whose existence is entirely digital, is owned by a specific individual, or community, or any business venture, and may be exchanged for the traditional currencies issued by the governments across the globe.
What are the tax obligations related to cryptocurrency transactions?
The government of India has specified that a flat tax of 30%, a surcharge of 10%, 15%, 25%, or 37% (as applicable), a cess of 4% on the net amount (if applicable), and a 1 tds on crypto on the overall amount for any single transaction of more than ₹50,000/- will be charged @1%, which the taxpayer can reclaim while filling his/her ITR for the FY 2022-23. It is important to note that the flat tax fee of 30% is only applicable to the profit (if any), in case of a loss in the same form of cryptocurrency, the loss can be offset against the profits made in the same financial year.
If you start calculating your tax obligations manually using excel sheets, it will probably take you months, and still, you might digitalnewshour end up with many errors in the balance sheets which you will have to re-iterate through. Binocs simplifies this herculean task for you by automating the whole process. Binocs has all formulas and rules defined and updated time-to-time in the system which helps you calculate your tax obligations in a few easy steps, with a very insightful report.
