The Central Board of Direct Taxes (CBDT) has come out with forms for Income Tax returns for this financial year 2023-24 and have an additional feature incorporated in the Income Tax Return forms. A separate schedule for Virtual Digital Assets (VDAs) has been added to report income from digital assets like cryptocurrency etc.

Provisions for taxing VDAs were introduced from 2022-23. The separate schedule for VDA requires details like the date of acquisition, date of transfer head under which income is to be taxed (Capital Gains), and cost of acquisition (in case of a gift) to be filled in by a person who is in receipt of amounts.Income from the transfer of virtual digital assets, like crypto and non-fungible tokens (NFTs), are taxed at 30 per cent at the end of each financial year. No deduction, except the cost of acquisition, is allowed while reporting income from the transfer of digital assets

The schedule for VDA is there in every ITR form, except the basic ITR1 form.

Finance Minister Nirmala Sitharaman while presenting the fourth budget on 01 Feb 2022 proposed a new definition of virtual digital assets which covered any information or code or number or token providing a digital representation of value exchanged, non-fungible tokens, etc, and also proposes a new scheme of taxation for such virtual digital assets.

It is known that virtual digital assets have gained tremendous popularity over the years. Trading in such digital assets has also increased substantially. This apart from a new trend where payment for the transfer of a virtual digital asset can be made through another similar asset has started prompting the need to add VDAs to be declared while filing returns.

Accordingly, a new scheme to provide for the taxation of such virtual digital assets has been proposed in the Bill. Clause 47A has been introduced under section 2 of the Act which defines Virtual Digital Assets as:

Any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically. A non-fungible token or any other token of similar nature, by whatever name called. (CBDT website)

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