Schedule VDA: How Do You Report And File Crypto Taxes in India?

schedule vda
Understand what Schedule VDA entails, how to categorise your crypto income, and navigate the filing process smoothly

The Indian crypto landscape has seen a whirlwind of activity, but with significant gains come tax responsibilities. Do you need clarification about how to report your crypto income? 

Schedule VDA is your answer! This dedicated section in your ITR form simplifies the process, but navigating it can still feel daunting. 

Fear not, crypto enthusiasts! This blog dives deep into Schedule VDA, demystifying its intricacies. We’ll guide you through classifying your income, calculating taxes, and filling out the form confidently. 

So, grab your digital wallets and prepare to conquer crypto tax season like a pro.

What is Schedule VDA?

If you’re in India and dealing with cryptocurrencies or other virtual digital assets (VDAs), you’ve likely come across the term “Schedule VDA.” But what exactly is it? Don’t worry; understanding it’s less complex than it might sound.

Schedule VDA is a section of specific Indian income tax return (ITR) forms. It was introduced in the Union Budget of 2023. It’s where you report any income you earned from buying and selling VDAs, like Bitcoin, Ethereum, or even NFTs. It’s a way for the government to track and tax your crypto activity.

Think of it as a separate page in your tax return for your crypto dealings. It asks for details like:

  • Date you bought the VDA: This helps determine how long you held it, which affects the tax rate.
  • Date you sold the VDA: This helps track your profit or loss.
  • The amount you paid for the VDA is your “cost of acquisition,” which is essential for calculating your taxable profit.
  • The amount you received for selling the VDA: This is your income.

Accurately filling out Schedule VDA ensures you comply with tax regulations and avoid potential penalties. 

How Are Cryptocurrency Taxed in India?

If you’re dabbling in the crypto world in India, understanding how your cryptocurrency earnings are taxed is crucial. It might seem not very easy, but let’s break it down:

  • Income Tax: There are cases in which the Income Tax department views crypto transactions as income. In such cases, the tax applied on the transaction is not CGT but income tax. Such transactions are:
    • Coins Earned As Airdrops
    • New coins earned from Mining
    • New tokens earned from staking
    • Receiving crypto gifts
    • Getting paid in cryptos. 
  • Capital Gains Tax: Forget different short-term and long-term gains rates. The government taxes all profits from cryptocurrency activity at a flat rate of 30%. 
  • Additional Charges: In addition to the 30% tax, authorities add a 4% health and education cess to the cryptocurrency capital gains tax.
  • Tax Deducted at Source (TDS): When you sell crypto exceeding INR 50,000 (or INR 10,000 in specific cases) within a year, 1% TDS is deducted at the source. Think of it as an advance payment towards your final tax bill.

Which ITR Forms Do You Need To Fill For Crypto Taxes?

Before diving into how to file your ITR forms, it is essential to discuss what they are. In India, Income Tax Return (ITR) forms are documents that taxpayers use to report their income earned during a financial year (April 1 to March 31) and the taxes paid to the Income Tax Department of India. These forms vary based on the source and amount of income and the category of the taxpayer.

Types Of ITR Forms

Here’s a brief overview of the different types of ITR forms commonly used in India:

  1. ITR-1 (Sahaj): This form is for individuals with income from salaries, one house property, other sources (interest, etc.), and total income up to Rs 50 lakhs.
  2. ITR-2: Individuals and Hindu Undivided Families (HUFs) who do not have income from profits and gains of business or profession can use this form. It includes income from more than one house property, capital gains, foreign assets/income, etc.
  3. ITR-3: This form is for individuals and HUFs having income from profits and gains of business or profession.
  4. ITR-4 (Sugam): It’s for individuals, HUFs, and firms (other than LLPs) with presumptive income from business and profession.
  5. ITR-5: It’s for firms, LLPs, Association of Persons (AOPs), Body of Individuals (BOIs), Artificial Juridical Persons (AJP), Cooperative societies, and local authorities.
  6. ITR-6: This form is for companies other than those claiming exemption under section 11 (income from property held for charitable or religious purposes).
  7. ITR-7: It’s for persons, including companies, required to furnish returns under sections 139(4A), 139(4B), 139(4C) or 139(4D) (i.e., trusts, political parties, institutions, colleges, etc.).

Which ITR Forms Should You Fill To Report Your Crypto Taxes?

The two ITR forms needed to report your crypto taxes are ITR-2 and ITR-3. Let’s see how these two forms help file the crypto taxes in India. 

ITR-2 Form:

As mentioned earlier, HUFs or individuals who don’t have any income from gains or profits fill out ITR-2. So, individuals who are earning income in the form of cryptocurrency are liable to fill out this form to declare their crypto income. Transactions that satisfy the case of income taxes in cryptocurrency are: 

  • Receiving cryptocurrency in the form of Airdrops
  • Mining new cryptocurrency as a hobby 
  • Staking cryptocurrency
  • Receiving cryptocurrency as a gift
  • Earning salary in terms of cryptocurrency.

ITR-3 Form:

The ITR 3 form is for individuals who earn money from their business or profession, including income from other sources. It’s also for those who have Income From Other Sources:

Recently, there have been updates to the ITR 2 & 3 forms due to the 2023-24 Annual Budget. One significant change is adding a section specifically for reporting earnings from Virtual Digital Assets (VDAs).

In this new section, you’ll need to provide details such as:

  • When you acquired the assets
  • When you sold them
  • How much do you sell them for
  • The cost of acquiring them, especially if you received them as a gift
  • Any capital gains you made from selling them

These details must be filled out by anyone who received income from VDAs.

How Can You File Your Income Tax Return Online?

Here’s a step-by-step guide on how you can fill out your ITR form online: 

Step 1: Log In

  • Go to the official official Income Tax e-filing website.
  • Click on the ‘Login’ button.
  • Fill in your PAN number in the User ID field.
  • Click ‘Continue’ to proceed.
  • Check the security message box.
  • Enter your password.
  • Click ‘Continue’ to move forward.
VDA 1

Step 2: Select “File Income Tax Return”

  • Click on the ‘e-File’ tab.
  • Then, select ‘Income Tax Returns’.
  • After that, choose ‘File Income Tax Return’.
ITR 2

Step 3: Choose The Correct “Assessment Year”

  • Choose the ‘Assessment Year’ as ‘AY 2024-25‘.
  • Select the mode of filing as ‘Online’.

Step 4: Select Your Status

  • Pick your filing status: Individual, HUF, or Others.
  • Choose ‘Individual’ and click ‘Continue’.
ITR 3

Step 5: Choose The Type Of ITR Form You Need To Fill

Now, you must select the type of Income Tax Return (ITR) form that matches your tax situation. As explained above, seven different ITR forms are available, each suited for various taxpayers and income sources. 

For instance, individuals and HUFs who don’t have income from businesses or professions but have capital gains can use ITR 2.

ITR 4

Step 6: Select The Reason Why You're Filing Your Income Tax Return (ITR).

Next, you’ll need to indicate why you’re filing your returns. Choose the option that best fits your situation:

  • If your taxable income exceeds the basic exemption limit.
  • If you meet specific criteria that mandate filing ITR.
  • If none of the above applies to you, select ‘Others’.
ITR 5

Step 7: Select The Respective Schedule

  • On the following page, under the “Select Schedule” section, choose “Income“.
ITR 6

Step 8: Choose Schedule VDA

Scroll down the page and tick the box next to “Schedule VDA“. Then, click on “Continue” to proceed.

Step 9: Report Your Capital Gains In Schedule VDA

  • After selecting Schedule VDA, click “Add Another” on the subsequent page. 
  • On the subsequent page, you must provide the following information for each crypto trade to add them to Schedule VDA. You should repeat these steps multiple times to include all your transactions.
  • After inputting all your transactions with the necessary details, the Income Tax Portal will automatically compute your profit and loss.
  • Once you’ve reviewed your figures and are satisfied with the Schedule VDA information, click “Confirm” to finalise this section.
ITR 8

Step 10: Add Other Information

  • Choose “Schedule Income from Other Sources” on the schedules summary screen.
  • Then, select “Gross Income Chargeable to Tax at Normal Applicable Rates” and proceed to add the relevant details.
  • For the nature of income, opt for “Any Other Income” and proceed to add the necessary information.

Step 11: E-Verify Your Return

The final and most essential part is to verify the return. Failure to do so is akin to not filing it at all. You can e-verify your return through various methods such as Aadhaar OTP, electronic verification code (EVC), Net Banking, or by sending a physical copy of ITR-V to CPC, Bengaluru.

Can You Set Off Your Crypto Losses?

Unfortunately, you cannot offset your crypto losses in India against any other income or carry them forward to future years. This means that if you sell a cryptocurrency for less than you bought it, you cannot offset it with your capital gains.

Moreover, this rule applies to all types of crypto assets, including cryptocurrencies and NFTs. It was introduced in the Union Budget 2022 and is governed by Section 115BBH of the Income Tax Act.

How Can KoinX Help You File Your Crypto Taxes in India?

You must first evaluate all your income and gains to file your taxes correctly. You can create an account or log into a cryptocurrency tax calculator designed for Indian users, such as KoinX.

After that, you’ll connect all the exchanges, wallets, and blockchains you’ve used for trading. For detailed instructions on setting up your KoinX account, refer to our help guide on integrations. 

Once everything is connected, KoinX will automatically calculate your profits, losses, income, and other relevant information for tax purposes. Here are some of the advantages that the platform offers to its users: 

Accurate Preview Of Taxes:

KoinX takes the hassle out of manually recording your crypto transactions. With its intuitive interface and automated features, you can easily import your data from various exchanges and wallets, ensuring accuracy and completeness.

Reliable Tax Report

Calculating your crypto taxes can be a complex and error-prone process. KoinX eliminates this stress by providing comprehensive tax reports tailored to your jurisdiction. Stay compliant and avoid costly penalties with KoinX’s expert-backed tax calculations.

Auto-Classification Of Transactions:

KoinX is more than just a crypto tax calculator; it’s your one-stop shop for complete crypto portfolio management. 

KoinX automatically classifies your crypto transactions, so you don’t have to do it manually. This can save you a lot of time and effort.

Conclusion

Whew! You’ve made it through the intricate world of Schedule VDA and Indian crypto tax reporting. Remember, the crypto landscape is ever-evolving, so staying informed is critical. 

Moreover, whether you’re a seasoned trader or a crypto newbie, KoinX empowers you to optimise your taxes and stay ahead of the curve in the dynamic world of cryptocurrency. 

So why wait? Sign up on KoinX today and make your crypto tax reporting easier than before.

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