Government is working on FAQ regarding taxation on cryptocurrencies, tax problems will be overcome

It will be reviewed by the Law Ministry.

The FAQs are for informational purposes and have no legal validity, but the opinion of the Law Ministry is being sought to ensure that there are no loopholes in it.

Government cryptocurrency ,Cryptocurrency) on taxation (TaxationIt is working on Frequently Asked Questions (FAQ). Giving this information, an official said that the Income Tax and Goods and Services Tax (GST) on virtual digital assets from the FAQGST) things will become clearer. The official said the draft set of FAQs is being prepared by the Department of Economic Affairs (DEA), Reserve Bank of India (RBI) and the Revenue Department. It will be reviewed by the Law Ministry. “Frequently asked questions regarding tax on cryptocurrencies and virtual digital assets are in the works,” the official said.

Though the FAQs are for informational purposes and have no legal validity, the opinion of the Law Ministry is being sought to ensure that there are no loopholes in it.

The official said that the DEA, the Department of Revenue and the Reserve Bank are working to ensure that the taxation aspect is clear to the field tax offices and those dealing in cryptocurrencies and other digital currencies.

Crypto asset 30 percent tax from April 1

In the budget for the financial year 2022-23, things have been clarified regarding the imposition of income tax on crypto assets. With effect from 1st April, 30 per cent income tax, cess and surcharge will be levied on such transactions in the same manner as the tax law imposes on horse racing or other betting transactions.

1% TDS on payment above Rs 10,000

Budget 2022-23 also proposes tax deduction at source (TDS) of 1 per cent on payment of more than Rs 10,000 from virtual currency in a year and taxation on recipients of such gifts.

Under this, the TDS limit will be Rs 50,000 per annum for certain special persons. These include individuals/HUFs etc. who will have to get their accounts audited under the Income Tax Act.

The provision of 1 per cent TDS will be applicable from July 1, 2022, while the tax on profits will be levied from April 1.

From the point of view of GST, it will be clear from the FAQ whether cryptocurrency is a commodity or a service. Currently, services provided by crypto exchanges attract 18 per cent GST and are classified as financial services.

The classification of cryptocurrencies is not clearly mentioned in the GST law. In the absence of a law regulating such virtual digital currency, classification will have to take into account whether the legal framework classifies it as an actionable claim.

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