With Diwali just around the corner, the hunt for the perfect gift is on! While gold has been a long-standing tradition in India, the youth have set their eyes on a new trend – gifting cryptocurrencies. Buying pieces of gold jewelry as Diwali gifts is customary in India, as it resembles a long-term investment. However, times are changing. This year, youngsters with a digital-first mindset are keen to gift and invest in cryptos during the festive season.
Even with the crypto winter, investors have high hopes for better returns over a long period. With cryptocurrencies, the price will be multifold in comparison to gold. With the changing trends and digitalization, the investment sector has witnessed a radical shift. Moreover, this is especially true among people who prefer gold as a high-profit risk-free investment option. With the recent surge in Bitcoin prices, investors are inclined to invest in crypto.
However, every rainbow has its rain. If you are planning to gift crypto, NFTs, or digital assets this Diwali, it’s crucial to understand that the Indian government has implied taxes on digital assets. Therefore, this article will guide you through the taxation of transactions levied on cryptocurrencies.
Virtual Digital Assets, as Diwali Gifts: Will Tax Be a Problem?
Virtual digital assets are regarded as ‘movable assets’ by the government of India, in its Union Budget 2022. Therefore, family members are not required to pay taxes on cryptos as gifts. However, in the case of a non-family member, any asset worth more than 50,00 is liable to taxes.
However, before delving deep, it’s crucial to understand what are virtual digital assets.
Any code, token, number, or information apart from Indian and foreign countries use cryptography and are virtual digital assets. Thereafter, it is a digital representation with a store of value. Moreover, one can use it as an investment or for financial transactions. One can transfer it, store it, or trade it electronically. Similar other tokens, or NFTs are also a part of virtual digital assets.
Tax Implications on VDAs
India’s tax treatment on gifts is variable, depending on the type of gift. The tax differs depending on whether it is a movable property, immovable property, or money. As per Union Budget 2022, the virtual digital assets fall under movable objects. Therefore, any crypto received as gifts falls under the slab of ‘income from other sources.’ However, tax implies only if the value is above 50,000.
Cryptocurrencies are trending among Diwali gifts this season. Thereafter, it can be as airdrops, crypto paper wallets, or crypto tokens. Crypto as a Diwali gift from relatives is usually tax-exempt. However, if one receives crypto from a non-relative in crypto with a value exceeding 50,000, he or she is liable to pay taxes. Moreover, the receiver has to pay 30% tax, with additional surcharges. The Rule 11A determines the value of taxes.
Also Read– Best Crypto Gifts in Festive Season
The cryptocurrency industry is growing rapidly. Thereafter, the recent bitcoin surge has led several young Indians to invest in crypto, even using them as Diwali gifts for friends and relatives. With an increasing demand, the future of crypto in India is bright.