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Bitcoin Tax: Bitcoin at new peak, but tax rules strict in India; Know how to report in ITR

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Bitcoin Tax: Bitcoin at new peak, but tax rules strict in India; Know how to report in ITR
Bitcoin Tax: Bitcoin at new peak, but tax rules strict in India; Know how to report in ITR

Bitcoin Tax: Bitcoin has touched a record high, but in India, strict rules are applicable for tax on its earnings. It is necessary to give information about every transaction under the VDA section in ITR, otherwise a heavy penalty can be imposed. Know the complete details.

Bitcoin Tax: Bitcoin (Bitcoin Price Today) has set a new record this week. This cryptocurrency reached $ 1,12,694 (about ₹ 96.61 lakh) on Thursday, which is its highest level so far. It has gained more than 90% since July 2024.

However, no crypto asset, including bitcoin, has been officially recognized for investment in India. Indian regulatory agencies have not yet classified them as an asset class. Despite this, if an investor has made a profit from bitcoin, then it is mandatory to pay tax under the Income Tax Act.

30% flat tax on bitcoin earnings

Under Section 115BBH of the Income Tax Act, bitcoin is taxed as a virtual digital asset (VDA). Under this, a flat tax of 30% is levied on the income earned from any transaction.

This income is calculated by subtracting the purchase cost from the selling price. Neither any deduction nor any exemption is available on this. Also, any loss incurred from such earnings can neither be set off against any other income nor can it be carried forward to the next years.

Suppose an investor bought bitcoin for ₹ 6 lakh and sold it a few months later for ₹ 10.5 lakh. He got a net income of ₹ 4.5 lakh from this transaction.

This will be taxed at the rate of 30%:

₹4,50,000 × 30% = ₹1,35,000

This means the investor will have to pay ₹1.35 lakh tax on this transaction.

Tax is also applicable on bitcoin received as a gift

If a person has received bitcoin as a gift or transferred at a very low price, and its 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 bitcoin worth ₹1 lakh from someone as a gift without making any payment, then the entire amount i.e. ₹1 lakh will be considered as his income. 30% tax will have to be paid on it.

Similarly, if you have bought bitcoin worth ₹1.90 lakh from someone for only ₹1 lakh, then the difference between the market value and the amount paid i.e. ₹90,000 will be considered as taxable income. That too will be taxed at the rate of 30%.

Where and how to report in ITR?

The rise in bitcoin may be historic, but its tax rules in India are very strict. In case of wrong reporting or hiding information, one may have to face heavy fines. Therefore, it is important to file the information of crypto-related profits correctly in ITR.

In addition to 30% flat tax on earnings from crypto, TDS is also levied. 1% TDS (Section 194S) is also applicable on every crypto transaction. CoinDCX co-founder Sumit Gupta says, ‘If the exchange does not deduct TDS or the investor does not deposit TDS, then he may face penalty or even jail.’

From the financial year 2022-23, a separate section called Schedule VDA has been added to the Income Tax Return (ITR) form for income from VDA. In this, the investor has to provide information about the date of transaction, purchase price, selling price and tax.

If Bitcoin is held through a foreign wallet or exchange, it is also mandatory to provide its information in Schedule FA (Foreign Assets).

From the financial year 2022-23, a separate section named Schedule VDA has been added in the Income Tax Return (ITR) form for income from VDA. In this, the investor has to give information about the date of transaction, purchase price, selling price and tax.

If bitcoin is held through a foreign wallet or exchange, then it is also mandatory to give its information in Schedule FA (Foreign Assets).


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