Key Things to Know When Reviewing Earnings from Crypto Investments

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Tax filing: A common confusion among taxpayers relates to tax on income from investments in cryptocurrencies and other similar digital currencies. Here is an explanation on the same

Crypto exchanges are working to simplify the RTI filing process, which means a strong focus on compliance and transparency. The new ITR forms for FY 2022-23 now also have a dedicated section called Schedule – Virtual Digital Assets (VDAs) to report earnings from crypto/non-fungible tokens (NFTs) and other VDAs.

This requires details such as date of acquisition, date of transfer, taxable income category, cost of acquisition if gifted and consideration received.

“When filing a tax return on gains from crypto investments, it is important to keep accurate records of transactions, determine the classification of crypto assets as appropriate heads of income under the regulations of the income tax (such as business income, capital gain, etc.), and calculate and report the tax impact accordingly in the dedicated section of the RTI,” said Pranav Pagaria, Vice President – Finance and Tax, CoinDCX at CNBC-TV18.com.

This is because the TDS deducted and deposited in each user’s name is already available from the income tax department and failure to report or misreporting of crypto transactions could invite tax scrutiny. income.

“We therefore encourage all of our users to diligently report their crypto transactions when filing tax returns for the 2022-23 fiscal year,” Pagaria added.

When looking at the gains from crypto investments, there are a few key things to remember:

First, the introduction of Section 115BBH in the 2022 budget imposes a 30% tax on profits derived from trading cryptocurrencies from April 1, 2022.

“Additionally, under Section 194S, a withholding tax of 1% is levied on the transfer of crypto assets if the transactions exceed Rs 50,000 (or even Rs 10,000 in some cases) during the same financial year, starting July 1, 2022. It is crucial to see that these tax rates apply to full-time investors and traders,” said Punit Agarwal, Founder of KoinX, a crypto tax platform during an interview with CNBC-TV18.com.

The tax rate of 30% and the TDS of 1% remain the same regardless of the nature of the income; that is, whether the income is classified as capital gain or business income, the tax rate would still be 30%.

Another thing to keep in mind for crypto investors filing their tax returns is the correct ITR forms.

“Forms ITR-2 and ITR-3 are the applicable ITR forms. ITR-2 is for people who realize capital gains by investing in VDAs and have no business income. Most crypto investors will opt for ITR-2. ITR-3 is for people with business/professional income (from VDA or any other business). This form will be suitable for crypto investors engaged in trading or other business activities,” Agarwal said.

Crypto investors will also be eligible to take into account the TDS deducted in fiscal year 2022-23. The TDS credit can be viewed in both AIS and Form 26AS, available on the Income Tax Portal. If an investor incurs a loss trading ARVs during the year, they can claim a refund of the TDS by depositing an ITR (assuming there is no taxable income).

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