According to an official, the government is working on a collection of FAQs (Frequently Asked Questions) on the taxation of cryptocurrencies, which would provide nuanced clarity on the applicability of income tax and GST on virtual digital assets.
The set of FAQs, developed by the Department of Economic Affairs (DEA), the Reserve Bank of India (RBI), and the Revenue Department, will also be reviewed by the law ministry, according to the official.
The DEA, Revenue Department, and Reserve Bank are working together to guarantee that the taxation component is apparent for both field tax offices and people who deal with cryptocurrencies and other virtual digital assets. The levy of income tax on crypto assets has been explained in the 2022-23 Budget.
From April 1, such transactions will be subject to a 30% income tax, plus cess and surcharges, in the same way as profits from horse races or other speculative trades are treated under tax law.
The Budget 2022-23 also suggested a 1% TDS (tax deducted at source) on virtual currency transfers exceeding $10,000 per year, as well as taxation on such presents in the hands of the receiver.
The TDS threshold limit would be Rs 50,000 per year for selected persons, including individuals/HUFs who are required to have their accounts audited under the I-T Act.
The regulations relating to 1% TDS will go into effect on July 1, 2022, whereas the gains will be taxed on April 1.
In terms of GST, the FAQ is expected to clarify whether cryptocurrency is a good or service.