In the world of cryptocurrencies, tax obligations have become an important aspect for investors to navigate. With the introduction of a taxation framework for crypto assets in India, investors are now preparing to file taxes for gains made in the financial year 2022-23. The Union Budget for FY 2023 outlined the tax rates and regulations governing crypto assets, aiming to bring clarity to this emerging market.
To shed light on the intricacies of crypto taxation, Indy Sarker, co-founder of TaxCryp, a crypto tax solution company, joins us in the Simply Save Podcast. Sarker shares valuable insights into how crypto gains are taxed, distinguishing between taxation norms for investors and professionals, considerations for airdrops and non-fungible tokens (NFTs), and important aspects to keep in mind while filing Income Tax Returns (ITR) this year.
One key aspect highlighted by Sarker is that investors are not allowed to offset losses in one crypto asset against gains in another. This means that even if an investor sells one bitcoin at a profit and another at a loss, they are still liable to pay a 30 percent tax on the profit earned from one token. Understanding the tax implications of internal transfers is also crucial, as transfers between personal accounts or wallets are not considered commercial transactions and are not subject to taxation until they involve different tax entities.
The introduction of a 1 percent tax deducted at source (TDS) by the Indian government had initially raised concerns among crypto investors. However, as people familiarized themselves with the provisions, trading volumes started to pick up again. Sarker emphasizes the importance of considering the cost basis for crypto assets received as payment for services rendered, as it can affect the tax obligation associated with these assets. Furthermore, the recipient of an airdrop is responsible for determining their tax obligation.
When filing income tax forms, investors are advised to disclose all their centralized exchange wallets, international wallets, and decentralized finance wallets. Accurate reflection of TDS collected by exchanges against the investor’s PAN card is crucial for compliance. The new income tax form includes a section specifically for reporting crypto gains, ensuring that investors include their crypto gains in this section during the finalization of their tax returns.
Crypto taxation can become complex when dealing with aspects such as airdrops, liquidity pools, derivatives, and mining. In such cases, seeking professional advice is highly recommended to ensure proper compliance. With many crypto investors entering the tax net for the first time, it is important to provide support and guidance to ensure adherence to tax regulations.
As the crypto market continues to evolve, understanding and complying with tax obligations will remain a vital aspect for investors. The insights shared by experts like Indy Sarker serve as a valuable resource to help investors navigate the new taxation regime and fulfill their tax obligations in a compliant manner.
