Income Tax Returns (or ITR) is one of the most important legal pre-requisites for individuals and businesses that make any kind of transactions or money transfers.
The basic purpose of ITR is to report how much money you’re making, and what are your expenses, along with other financial information that may be required for the purpose of paying taxes.
Your income from a job, business, or investments, requires you to pay taxes. These taxes are distributed into slabs that are categorized based on how much you earn in a financial year. ITRs are applicable for a certain financial year between 1st April to 31st March of the year.
In the Financial Year 2023-24, the due date for filing ITRs for individuals is 31st July 2023.
For a crypto investor in India, the need to file ITR arises when there is a single profitable trade. In case a crypto investor makes any gains from his investments, he/she is liable to pay taxes and file ITR on them.
How do you file your returns in ITR Forms?
To understand how to file your returns in ITR forms, you need to understand what they are.
ITR forms are the different types and categories of forms that could be used to file an Income Tax Report. These forms are based on factors like income level, sources of income, or type of income.
In India, we have 7 types of ITR Forms – ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7.
In these types, the ITR 2 and ITR 3 type of forms are more relevant for crypto investors.
Understanding the ITR Forms
ITR-2
The ITR 2 form is for individuals not receiving income from ‘Profits and Gains from Business or Profession.’
This form is applicable to people with Income From Other Sources too. This means that crypto investors who make profits from Airdrops, crypto mining, referrals, IDOs, or savings interest are eligible to file their returns in ITR 2 form.
ITR-3
The ITR 3 form, on the other hand, is applicable to individuals who make an income from profits and gains on their business or profession. This form too is applicable to people that have an Income From Other Sources.
However, the Annual Budget for 2023-24 brought in some major changes to the ITR 2 & 3 Form. In these changes, we were introduced to a separate schedule for “Virtual Digital Assets (VDAs)” as well.
This separate schedule for VDAs requires details like
- Date of Acquisition
- Date of Sale
- Sale value
- Cost of Acquisition (in case of gifts)
- Capital gains
These details are to be filed by the person that receives this amount.
How to file the income tax return?
To file the income tax return, investors need to fill in date-wise trade details including buy date, buy value, sell date, sell value, and profit amount, along with the loss – whose amount should be 0.
Steps for filing an Income tax return
Step 1: Login to the Income tax portal here.
Step 2: Click on “e-file” on the home page and select “file Income tax return” under the heading “Income tax return”.
Step 3: Select the Assessment year as AY 2023-24 and select the mode of filing as Online.
Step 4: Select the ITR form as applicable (ITR 2 or ITR 3).
Step 5: Fill in the basic details including personal information. Go to Schedule Capital Gain and select asset type as Virtual digital assets (VDA) and enter all your crypto trading details date-wise. These details will be part of Schedule VDA in ITR.
Schedule VDA will include the following details – trade wise:
- Serial number
- Buy Date
- Sell Date
- Buy Value or Cost of the previous owner, if received as a gift
- Sell Value
- Enter profit amount or Nil, if loss.
Note: Schedule VDA report is directly available for download on the KoinX website.
Step 6: Before finalizing and filing the Income tax return (ITR) please consult with your Qualified Crypto Tax Expert to ensure the accuracy and correctness of the ITR.
Step 7: After completing adding all details in ITR, proceed with verification and use Aadhaar OTP to complete the filing process.
How do you treat Set off and Carry Forward Losses in the previous year?
- Crypto losses off-set within the same coin are not allowed
Example: Gain in BTC +100, Loss in BTC -50, This cannot be offset
- Crypto losses off-set with a different coin are not allowed
Example: Gain in BTC +100, Loss in ETH -50, This cannot be offset
- Crypto losses off-set with different capital gains income are not allowed
Example: Gain in BTC +100, Loss in Shares -50, this cannot be offset
- Crypto losses off-set with different income sources are not allowed
Example: Gain in BTC +100, Loss in Business Income -50, this cannot be offset)
- Crypto losses carry-forward is not allowed
What is your tax payable for the year 2022-2023?
The tax payable for the year 2022-23 would be at 30% plus surcharge and 4% cess. The TDS will be reduced from the total tax payable.
Conclusion
With the current crypto taxation landscape in India, understanding your tax implications is important. However, the technicalities and numbers involved could also seem too daunting, to begin with.
That’s why KoinX is here to simplify the taxation maze for you. KoinX is a unique crypto-taxation platform built to help you with your taxes. Our one-click integration feature directly integrates with your preferred crypto exchange and we provide you with a detailed report of your crypto transactions along with your tax obligations.
Sign up and let us make crypto taxes easier for you.
