Published by: Vivek Dubey
With the rise of cryptocurrencies, many taxpayers are confused about how to disclose earnings from investments in virtual digital assets such as Bitcoin and Ethereum in their Income Tax Returns.
Here are few key points to keep in mind when reporting income from the transfer of virtual digital assets:
ITR filing is compulsory for individuals earning a specified amount of income in a year.
Virtual Digital Asset (VDA) covers cryptocurrencies, non-fungible tokens (NFTs) and any other notified digital asset.
Income from the transfer of VDAs must be reported in Schedule VDA in the ITR form.
Income from VDAs is taxed at a rate of 30% and applicable surcharge and cess.
No deductions can be availed for any expenses, except for the cost of acquisition, if applicable.
Schedule VDA requires details such as the acquisition date, transfer date, category of income for taxation, acquisition cost in case of a gift, and consideration received.
ITR-1 or ITR-4 cannot be filed by those who have income from VDA; instead, such income can be reported in ITR 2 or ITR 3.
Income from VDAs can be taxed either under the head of business income or capital gains.
Due dates for filing ITR are determined based on the chosen category: July 31 for capital gains and either July 31 or October 31 for business income.
It’s advisable to file ITR early to avoid mistakes that might have a negative impact on the outcome of filing returns.