According to the latest official guidelines, Virtual Digital Assets (VDAs) are taxed at a flat 30% rate on any income derived from their transfer, regardless of holding period or individual income slab. This applies to profits from selling, exchanging, or disposing of cryptocurrencies, NFTs, and other VDAs. Tax Deducted at Source (TDS) is applicable on payments exceeding ₹50,000 for specified persons or ₹10,000 for others in a financial year, as per Section 194S of the Income Tax Act. For income tax purposes, VDAs are classified as 'assets' rather than currency, making them subject to capital gains taxation. Any income from VDA transfers is taxable under Section 115BBH, with no deductions allowed except for the cost of acquisition. The government has strengthened VDA taxation through the Finance Act, 2022, providing clear legal basis for taxation and reporting.
According to reports from Mint, financial gifts and transfers in India are subject to specific taxation rules under the Income-Tax Act. Gifts from family members including spouse, parents, children, siblings, and linear relatives are fully exempt regardless of the amount involved. This exemption also applies to gifts given for marriage and as inheritance. However, gifts to non-relatives (acquaintances, friends, and other third parties) exceeding ₹50,000 in a financial year are taxable for the full amount. The tax department will consider the profile of the donor to check if the gift is affordable based on their past creditworthiness to eliminate black money laundering through gifts. Under Section 56(2)(x), gifts received without consideration or for inadequate consideration are taxable if their fair market value exceeds as per the latest official guidelines, including VDAs. Certain exceptions exist such as gifts from specified relatives or on marriage occasions.
For individuals and Hindu Undivided Families (HUFs) earning income from Virtual Digital Assets, ITR-2 or ITR-3 must be filed depending on other income sources. ITR-2 is generally appropriate for those with income from salary, house property, other sources, and VDA gains, while ITR-3 is required for those with business or professional income. Within the chosen ITR form, there's a specific schedule dedicated to Virtual Digital Assets (Schedule VDA), requiring detailed information about each VDA transaction including date of acquisition, transfer date, cost of acquisition, sale consideration, and computed gain or loss. The income taxable under Section 115BBH must be added to total income, and any TDS deducted under Section 194S should be claimed in the TDS schedule. Tax Deducted at Source (TDS) is applicable on payments exceeding ₹50,000 for specified persons or ₹10,000 for others in a financial year, with the buyer responsible for deducting this tax.
According to Mint, the definition of family under Income-Tax law includes spouse of the individual, brother/sister of the individual, brother/sister of the spouse, brother/sister of either of the parents, any blood relative/offspring, any blood relative/offspring of the spouse, and spouse of the individuals referred to above. For a Hindu undivided family (HUF), any member thereof is also considered family. Gifts received during marriage are non-taxable, as are gifts received under a will or by way of inheritance and gifts received in contemplation of the death of the donor. Certain exceptions exist for VDA gifts, such as gifts from specified relatives or on marriage occasions, with specific exemptions and thresholds outlined in the latest official Income Tax Department guidelines.
As reported by Mint, it is mandatory to disclose income in ITR and proper reporting ensures transparency. For high-value transfers, disclosure ensures your tax profile is in congruence with your Annual Information Statement (AIS) and prevents mismatch alerts for tax authorities. It is advisable to maintain comprehensive records of all digital asset transactions, including dates, amounts, parties involved, and proof of ownership such as blockchain transaction IDs for NFTs. For VDA transactions, maintaining detailed records is non-negotiable to prove cost of acquisition and transfer dates. Request a TDS certificate (Form 16A) from the person or exchange deducting tax on your VDA transactions, as this is vital for claiming correct credit when filing returns. For online payments, generate a Challan 280 with Challan Identification Number (CIN) to track your payment and quote this in your income tax return.
According to Mint, sale of movable property and personal effects other than shares and securities is not taxable. This includes art, bullion, collections, furniture, jewellery, sculptures, and vehicles. The exemption applies to movable and immovable gifts that are taxable unless received from relatives or on special occasions such as marriage, inheritance, or gifts received in contemplation of the death of the donor. For VDAs, the definition of 'transfer' is broad, covering almost any disposition of the asset, including selling, exchanging, or disposing. No deduction is allowed for any expenditure or allowance in computing VDA income, except for the cost of acquisition, making calculations relatively simple. Losses from VDA transfers cannot be set off against any other income, nor can they be carried forward to future assessment years, ensuring VDA transactions are treated distinctly from other asset classes.
