Cryptocurrency investors should report profits accurately to the tax department when filing an ITR to avoid problems.
Income tax return: Did you make profits from investing in virtual digital assets like cryptocurrencies or non-fungible tokens during the fiscal year 2022-23? If so, it is crucial to disclose this information to the tax department while filing your income tax return. It is essential to accurately declare your income from virtual digital assets and fulfill your tax obligations. Failure to do so may lead to complications down the line.
For the assessment year 2023-24, the Income Tax Department has introduced Schedule VDA (Virtual Digital Asset) in the new ITR Forms 2, 3, 5, 6, and 7. Taxpayers are required to report their profits from investments in cryptocurrencies or non-fungible tokens when filing their income tax returns.
Taxpayers should be aware that the tax department possesses comprehensive information regarding profits generated from cryptocurrency or non-fungible tokens. Virtual digital asset exchanges provide all relevant details to the tax department. You can access this information through the Tax Information Statement (TIS) on the Income Tax Return Filing website.
When filing your income tax return, you must specify whether the income from VDA assets should be treated as business income or capital gains. It is imperative to accurately report this income. To ensure the accuracy of your declared income, it is advisable to review your tax credit statement (Form 26AS). Additionally, examine the Annual Information Statement, which provides complete details about tax deductions (TDS) under section 194S.
Notably, in the financial year 2022-23, a 30 percent tax was imposed on profits derived from virtual digital assets starting from April 1. Furthermore, as of July 1, 2022, a one percent TDS was levied on every transaction involving virtual digital assets. This measure aims to identify investors involved in cryptocurrency or non-fungible token investments.
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