The VDA legislation in India is still being evolved. The new tax on crypto has been announced by the government. Learn more about the taxation of virtual digital assets (vda) in India by reading the article below.
In India, cryptocurrency is referred to as a Virtual Digital Asset or VDA. The finance minister unveiled the regulations for taxation on virtual currency, non-fungible tokens, and other VDAs in the Budget. (Virtual Digital assets).
They also included rules for tax on giving gifts of cryptocurrency, NFTs, etc. According to the Income Tax Act, the recipient will be responsible for paying taxes on gifts of cryptocurrency, NFTs, etc. Learn more about the taxation of virtual digital assets (VDA) in India and the crypto gifting tax system by reading the article below.
Forms of Crypto Gifting
Through the cryptocurrency exchange, a trader or investor can give cryptocurrency using gift cards, cryptocurrency paper wallets, cryptocurrency tokens, etc.
- Crypto Gift Cards – The Bitcoin exchange offers gift cards that users can purchase to give to friends and family.
- Crypto Paper Wallet – A cryptocurrency dealer can also present a paper wallet, which contains a single private key and a Bitcoin address.
- A Crypto Token –A cryptocurrency trader may give a crypto token, also known as a virtual currency token or a cryptocurrency denomination.
Tax on Crypto Gifts
Gifts of immovable property, cash, and some moveable assets like shares, jewelry, etc. are taxed under Section 56 of the Income Tax Act. To include “Virtual Digital Asset (VDA)” in the definition of property, or moveable assets, the finance minister revised Section 56 for the taxation of gifts as part of Budget 2022.
Cryptocurrency, NFT, and any other digital asset that has been notified are all considered virtual digital assets or VDAs. The tax status of giving cryptocurrency, NFTs, and other VDAs is detailed below. It is taxable in the receiver’s hands beginning with the fiscal year 2022–2023:
| Type | Taxability |
| VDA Gift with a value of up to INR 50,000 | Exempt from tax |
| VDA Gift with a value exceeding INR 50,000 received from a relative | Exempt from tax |
| Gift of VDA with a value exceeding INR 50,000 received from non-relative | Taxable in the hands of the receiver |
| Received on the occasion of marriage, via inheritance or will, or in contemplation of death | Exempt from tax |
Tax on Gifting Cryptocurrency
Check the tax rules for the gift-giver of a cryptocurrency when making the present and when the recipient sells the gift.
Tax on the Gift-Cryptocurrency Giver’s Transfer
A digital asset in the virtual world is a capital asset according to Section 2(14) of the Income Tax Act. Capital gains are taxed when a capital asset is transferred. However, presents are expressly excluded from the concept of “transfer” in Section 47. As a result, the sender is not required to pay taxes on gifts of Bitcoin, NFT, and other VDAs.
Tax on the Selling of a Cryptocurrency Gift for the Giver
Income is combined with the income of the person who gifted the cryptocurrency if the recipient is a spouse or minor child.
Tax on Receiving a Gift of Cryptocurrency
When getting a crypto gift or selling one, be sure to check the tax implications for the recipient.
Tax on Transfer of Crypto Gift for the Receiver
If a recipient receives a cryptocurrency gift from a non-relative that has a value greater than INR 50,000, they are subject to taxation. A cryptocurrency gift that is received in conjunction with a wedding, an inheritance, or in anticipation of death is also not taxed. Such a gift is taxed at slab rates under the heading IFOS (Income from Other Sources).
Tax on the Sale of a Crypto Gift for the Receiver
When bitcoin is sold or converted, capital gains tax is due. Here are crucial factors to take into account when calculating the tax on gifted cryptocurrency:
- Period of Holding – Determine the holding period from the prior owner’s purchase date, or the sender of the gift, to the recipient’s sale date.
- LTCG – Virtual Digital Asset (VDA) retained from the sender’s purchase date to the sale date for a period exceeding 36 months.
- STCG – Virtual Digital Asset (VDA) kept from the sender’s date of purchase until the date of sale for up to 36 months.
- Purchase Date – the gift’s sender’s date of purchase as the prior owner
- Purchase Value – The price paid by the gift’s previous owner, who is also its sender,
- Sale Date – Date of the gift’s sale by the recipient
- Sale Value – The amount that the recipient of the gift sold it for.
- Tax Liability – Without the use of acquisition, improvement, or transfer expense deductions, the tax rate on the sale of cryptocurrencies is 30%.
| Transaction | Sender | Receiver |
| Gift of Virtual Digital Asset | Not taxable | Exempt Income or IFOS Income |
| Sale of Virtual Digital Asset | Not taxable | Capital Gains |
Clubbing of Income: Any income derived directly or indirectly from the gifted cryptocurrency, if the recipient is a spouse or minor child, is added to the giver’s income.
Conclusion
The gift of cryptocurrency will be taxable in the recipient’s hands, according to Budget 2022. According to the modifications made in Finance Bill 2022, the standard income tax provisions of Section 56 also apply to the gift of bitcoin. As a result, if received from a non-relative and valued at more than ₹50,000, gifts of bitcoin, NFT, or other VDA are taxable in the recipient’s hands. You can call Vakilsearch for additional details, and their experts will respond to all of your questions.
