Cryptos have been defined as a virtual digital asset. A virtual digital asset is:

• any information or code or number or token (not an Indian currency or any foreign currency)
• generated through cryptographic means providing a digital representation of value which is exchanged with or without consideration
• with the promise or representation of having inherent value, or functions as a store of value or a unit of account

• and includes its use in any financial transaction or investment, but not limited to, investment schemes and can be transferred, stored or traded electronically.
• Non fungible token and  any other token of similar nature are included in the definition. The Non-fungible tokens which are included will be notified by the Central Government.
• Central Government may notify any other virtual digital asset as virtual digital asset by way of notification in the Official Gazette.

• Central Government can notify such assets which shall not be considered as virtual digital assets for the purposes of the proposed section.

Crypto income will be taxed effective 1st April 2022, which means taxpayers need to think about advance taxes for FY 2022-23.

For calculating crypto income:

• No deduction allowed for expenses
• Only cost of acquisition can be deducted
• Crypto loss cannot be deducted from crypto income

• No set off of loss from any other type of income (business income or any salary income or house property income etc)
• No carry forward of any losses from cryptos to future years

Where income of a taxpayer includes any income from ‘transfer’ of any virtual digital asset, income tax payable shall be aggregate of
a) Tax on income from VDA @30%
b) Tax on (total income - income from VDA)

Th is scenario is not envisaged in the budget currently. However, wherever a consideration is paid for crypto (in this case may be construed as stuff purchased on purse.io), TDS considerations will apply. As such taxpayers will be discouraged from undertaking these transactions or else they may have to choose to report gains (based on FMV of stuff bought less cost price of cryptos) in their ITR and pay 30% tax on it.

Every transaction will attract TDS, based on specified conditions. Tax rules apply to total income earned during the year. However, taxpayers now need to be careful of advance tax provisions.

These scenarios are not yet envisaged in the tax law, but cryptos earned through staking will effectively be zero cost.

Yes, exchanges are liable to comply with TDS provisions. TDS will create a trail of transactions. This TDS will be linked to PAN and will start to appear in Form 26AS/AIS. Taxpayers will have to report such income or face notices.

Doesn't seem possible as per current provisions.

The tax treatment is similar to that of income from lotteries or gambling or horse racing. Even though horse racing allows related expenses to be deducted. The crypto tax treatment is similar to lotteries where no loss set off is allowed and all gains are taxable at flat 30%.

Bringing in taxation does not give it legitimacy. No significant policy departure. Govt still focussed on bringing in RBIs digital currency. Banning crypto seems impossible in the current world.

Anyone can get a PAN and report income and pay tax. Even minors can. Income which is earned by one’s own skill or knowledge is not clubbed and is reported in an individual's own return.

Rs 400 is your income. Pay tax @ 30%. Rs 120 is tax.

That’s right, the cost is considered zero while calculating gains.

Gift tax provisions as applicable to other types of assets have been replicated to VDAs. Gifts made to relatives (relationships specified in the act) are exempt from tax. Similarly, gifts received as inheritance, via a will, on marriage are exempt from tax. Any other gift shall be taxed if FMV exceeds Rs 50,000 (full value will be taxable for the recipient).