Time News Global Business, Technology, Entrepreneurship News
Related Articles
In India, cryptocurrency is known as a Virtual Digital Asset (VDA). In the Budget, the finance minister unveiled the regulations for taxing virtual currency, non-fungible tokens, and other VDAs (Virtual Digital assets). They also included tax rules for giving gifts of cryptocurrency, NFTs, and so on. According to the Income Tax Act, the recipient is responsible for paying taxes on cryptocurrency, NFTs, and other similar gifts. Read the article below to learn more about the crypto gifting tax system.
Different Types of Crypto Gifting
A trader or investor can give cryptocurrency through a cryptocurrency exchange by using gift cards, cryptocurrency paper wallets, cryptocurrency tokens, and so on.
Crypto Gift Cards –
Users can purchase gift cards from the bitcoin exchange to give to friends and family.
Crypto Paper Wallet –
A cryptocurrency dealer may also present a paper wallet containing a single private key and a bitcoin address.
Crypto Token-
A crypto token, also known as a virtual currency token or a cryptocurrency denomination, can be given by a cryptocurrency trader.
Tax on Cryptocurrency Gifts
When making a cryptocurrency gift, check the tax rules for the gift-giver and when the recipient sells the gift.
Tax on the Transfer of Cryptocurrency by the Gift-Giver
According to Section 2(14) of the Income Tax Act, a digital asset in the virtual world is a capital asset. When a capital asset is transferred, capital gains are taxed and can be calculated with the help of crypto tax software. Presents, on the other hand, are expressly excluded from the concept of “transfer” in Section 47. As a result, the sender is exempt from paying taxes on bitcoin, NFT, and other VDA gifts.
Tax on the Giver’s Sale of a Cryptocurrency Gift
In the hands of the giver, the sale of cryptocurrency given as a gift to the recipient is tax-free.
If the recipient is a spouse or minor child, income is combined with the income of the person who gifted the cryptocurrency.
Tax on Receiving a Cryptocurrency Gift
Check the tax implications for the recipient when receiving or selling cryptocurrency.
Tax on Crypto Gift Transfer for the Recipient
If a recipient receives a cryptocurrency gift worth more than INR 50,000 from a non-relative, they are subject to taxation. A cryptocurrency gift received in connection with a wedding, inheritance, or in anticipation of death is also exempt from taxation. Under the heading IFOS, such a gift is taxed at slab rates (Income from Other Sources).
Tax on the Purchase of a Crypto Gift for the Recipient
Capital gains tax is due when bitcoin is sold or converted. The following are critical factors to consider when calculating the tax on gifted cryptocurrency:
- Period of Holding –
Calculate the holding period beginning with the prior owner’s purchase date or the sender of the gift and ending with the recipient’s sale date.
- LTCG –
Virtual Digital Asset (VDA) retained for a period of more than 36 months from the sender’s purchase date to the sale date.
- STCG –
Virtual Digital Asset (VDA) kept for up to 36 months from the sender’s date of purchase to the date of sale.
- Purchase Date –
The gift’s sender’s purchase date as the previous owner
- Purchase Value –
The amount paid for the gift by its previous owner, who is also the sender.
- Sale Date –
The recipient’s sale of the gift.
- Sale Value-
The amount for which the gift was sold by the recipient.
- Tax Liability-
The tax rate on the sale of cryptocurrencies is 30% if no acquisition, improvement, or transfer expense deductions are used.
Binocs can assist you in learning more about digital currency and cryptocurrency, as well as in managing your crypto capital gains tax and tracking your crypto portfolio.
