Bitcoin tax: This week, Bitcoin Price Today has set a new record. This cryptocurrency reached $ 1,12,694 (about ₹ 96.61 lakh) on Thursday, which is its highest level so far. Since July 2024, it has increased by more than 90%.
However, no crypto asset, including bitcoins in India, has not received official recognition for investment. Indian regulatory agencies have not yet classified them as an asset class. Despite this, if an investor has made profit from bitcoin, it is mandatory to pay tax under the Income Tax Act.
30% flat tax on bitcoin earnings
Bitcoins are taxed as virtual digital assets (VDA) under Section 115BBH of the Income Tax Act. Under this, 30% flat tax is levied on any transaction earnings.
This income is calculated by reducing the cost purchased from the selling price. There is neither deduction nor any discount on this. Also, any loss from such earnings can neither be set off from any other income nor can be forwarded in the following years.
Suppose an investor bought bitcoin for ₹ 6 lakh and sold it after a few months for ₹ 10.5 lakh. With this transaction, he earned a net earning of ₹ 4.5 lakh.
This will be taxed at the rate of 30%:
₹ 4,50,000 × 30% = ₹ 1,35,000
That is, the investor will have to pay ₹ 1.35 lakh tax on this transaction.
Tax on bitcoin found in gift
If a person has been transferred at a bitcoin gift or a very low price, and his fair market value is more than ₹ 50,000, then this income will also be considered taxable as VDA.
For example, if a person has received a bitcoin worth ₹ 1 lakh from someone without paying any payment, then the entire amount i.e. ₹ 1 lakh will be considered his income. 30% tax will have to be paid on it.
Similarly, if you have purchased a bitcoin of ₹ 1.90 lakh from someone for only ₹ 1 lakh, then the difference between the market price and the amount paid will be considered ₹ 90,000 taxable income. He will also be taxed at the rate of 30%.
Where and how to report in ITR?
Bitcoin may be historic, but its tax rules in India are very strict. In the event of wrong reporting or information hiding, heavy fines may be faced. Therefore, it is necessary to admit information about the profits related to Crypto in ITR correctly.
In addition to 30% flat tax on earnings from Crypto, TDS is also imposed. 1% TDS (Section 194s) also applies to every crypto transaction. Sumit Gupta of Coindcx Sumit Gupta says, “If the exchange does not cut TDS or the investor does not deposit TDS, it can have a penalty or jail.”
From the financial year 2022-23, a separate section has been added to the Income Tax Return (ITR) form for earnings from VDA. In this, the investor has to give information about the date, purchase price, sale price and tax of transaction.
If bitcoin is held through foreign wallet or exchange, it is also mandatory to give information to Schedule FA (Foreign Assets).
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