Have you included information about your crypto assets in this year’s income tax return (ITR)? If not, the tax return needs to be revised. According to government figures, more than 58.3 million returns had been submitted by the deadline of July 31st, which was the final day for submitting ITRs.
The government has instituted a separate taxation structure for crypto assets or virtual digital assets as of the current fiscal year (VDAs). According to this, regardless of the tax bracket and without the advantages of offset and carryover of losses, gains from the sale of crypto assets are taxed at a flat rate of 30 percent.
For instance, equity investors can carry over both short-term and long-term losses for eight assessment years while offsetting losses in one stock against another. However, in this instance, that is not relevant.
For the purpose of deducting tax from the payment of consideration for the transfer of digital assets, a new provision, 194S, has been added to the Income-tax (I-T) Act. Additionally, a tax deducted at source (TDS) of 1% will be charged on the transfer of such assets above a specific amount.
Some investors mistakenly assume they are exempt from paying taxes on earnings from VDAs since there were no particular tax regulations for crypto assets in the previous fiscal year. That is not the case, though.
According to tax specialists, notwithstanding taxation regulations, people are nonetheless required to pay taxes on gains from cryptocurrency assets for prior fiscal years.
“In the previous financial year, there was no unique tax framework for crypto assets, therefore earnings were classified as regular capital gains. Gains were thus taxed as capital gains or business income for ITR reporting purposes, according to Naveen Wadhwa, deputy general manager at Taxmann.
Additionally, people are exempt from disclosing the source of capital gains. As a result, cryptocurrency profits were taxed similarly to gold or fine art.
Individuals have the benefit of being able to offset long- or short-term losses from crypto assets with other capital gains during the previous fiscal year, subject to Sections 70 and 71 of the Income-tax Act.
Tax professionals advise anyone who forgot to record cryptocurrency profits to quickly amend their taxes. After login into their accounts on the income tax site, people can choose to file an amended return.
According to Section 234F of the I-T act, taxpayers who file their returns later than July 31 would be subject to a fine of 5,000 rupees. The penalty is $1,000 and must be paid by the taxpayer in full before submitting the updated ITR if the income is under $5 lakh.
