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Income tax department of India
4 mins read

Crypto & ITR

20 JUL 2023

Crypto & ITR

You may know how Crypto is taxed in India. But do you know the nitty gritty details, such as relevant sections in ITR-2? Let's dive right in.

Some context; ITR Form stands for Income Tax Return Form. It's a legal document through which you declare all your incomes and the taxes that you have already discharged to the government. You are expected to disclose everything about your income and taxes. And you can't afford to make mistakes.

There are different ITR Forms depending on various criteria such as if you earned income through equity trading, if you run a business etc., In this article we focus on ITR-2 as it's the most widely used form since it relates to anyone filing returns with capital gains. And within ITR-2 we focus on sections that are relevant to crypto.

Indian tax authorities use the phrase "Virtual Digital Asset (VDA)" to mean Crypto. So if you are curious you can search for that phrase within ITR forms. Now, let's scan through the ITR-2.

The first section relevant section is “Schedule CG”. CG stands for Capital Gains which is gains made by selling of a capital asset. Capital asset includes assets such as land, jewellery, etc.,

Schedule CG

In this section you disclose all your capital gains over a financial year. Under this section you will find dozens of rows under multiple row headings. The one relevant for us is row titled “C2”

Virtual digital assets

Here we need to disclose the sum total of all capital gains. Note that this sum is *only* of gains which means you can’t offset gains with losses. The finance bill is explicit about this. The row explainer mentions “Col. 7 of Schedule VDA”, we will shortly visit this.

Excerpt from Finance Bill 2022 which explicitly states that crypto losses can’t be offset against any other gains.

Now, moving on we come to the sub-heading titled “F” under Schedule CG. In this you need to give a quarterly breakup of your crypto currency gains.

Capital Gain receipt information

Now we come to the “Schedule VDA”. Here you must list down *all* your crypto transactions where you sold or exchanged a crypto. Note that it is irrelevant what did you get in exchange for selling that crypto. You could have exchanged it for another crypto (e.g., sell BTC and buy ETH), fiat, goods or services.

ITR reiterates not to offset losses by explicitly mentioning “Sum of all Positive Incomes of Capital Gains..” They also helpfully back-reference you to the row C2 where you need to enter this sum of capital gains.

Income from transfer of virtual digital assets

And now we come to the final section where ITR mentions the exact applicable tax rates. Crypto is categorised under “Schedule SI” i.e., “Special Rates”. Here the 30% on capital gains is mentioned. You need to check this box and enter the exact tax. Here as well ITR provides helpful back-reference to get the value from the C2 row of Schedule CG and enter it under Income column.

Special rates of taxation

So, there you have it, it’s not all that complicated! What’s more you can generate all of this data with the click of a few buttons at Descrypt! So, what are you waiting for? Get started!

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