India will finally tax cryptocurrencies. In her Budget Speech on February 1, Finance Minister Nirmala Sitharaman stated that the transfer of digital assets, which includes cryptocurrencies as well as non-fungible tokens, will be subject to a 30% tax. All such assets transfers will be subject to a 1 percent tax deducted from the source (TDS). Gifting such assets attracts the 30% tax.
Moneycontrol reached out to chartered accountants for answers to the most commonly-asked questions. We are still waiting to hear from the tax department about the details of how it would be implemented. Here is what they had to share:
Karan Batra is the founder of Chartered Club. A tax consultancy
From April 1, 2022, the new provision will apply to tax cryptocurrency gains at 30%. It will not apply to those who sell crypto holdings in the current financial year. They can also look at book profits and losses prior to March 31, 2022. If you have gains and then sell them in the current financial year, these profits would not be subject to tax at 30%. This will change after April 1. Some may have suffered losses due to the fall in Bitcoin’s price. You should now book your losses. These can be carried forward or used to offset gains from other assets next year.
Ashok Shah chartered accountant, founding partner of N A Shah Associates LLP
Crypto participants will be able to only book losses prior to March 31, 2022 if they wish to offset such losses against their other income. Each participant will need to evaluate their income and determine if they are required to use the losses during the current year. If they believe that the crypto asset can recover losses and also provide strong gains, then they might hold. However, the gains they make from digital assets will be subject to a 30% tax starting in the next financial year.
The implementation of the TDS rules is still uncertain. TDS will be deducted in which party’s favor and who will be the counter-party (the platform, or another participant in the transaction). What if the counter party does not have a PAN or has not filed her returns? How will the buyer know if they have filed their return?