Crypto Gifts in India: Tax Rules for Virtual Digital Assets

Thinking about gifting some crypto to a loved one in India? You totally can, as Virtual Digital Assets (VDAs) are legally allowed for gifting here. Just remember to keep a gift deed; it’s super important for tax reporting later on when the recipient sells it.

Good news! Not all crypto gifts come with a tax bill right away. The Income Tax Act, specifically Section 56(2)(x), offers some generous exemptions.

• Gifts from specified relatives are completely tax-exempt, with no monetary limit.
• This includes your spouse, siblings (yours or your spouse’s), or even your parents’ siblings.
• Also exempt are gifts from lineal ascendants and descendants like parents, children, grandparents, or grandchildren (yours or your spouse’s), and the spouse of any listed person.
• Special occasions like marriage, or gifts received through a will or inheritance, are also fully tax-exempt.

Gifts from Non-Relatives: When You Owe Tax

Things change if you receive a crypto gift from someone who isn’t a specified relative. If the total value of all such gifts in a financial year goes over ₹50,000, the entire amount becomes taxable.

This income gets classified as “Income from Other Sources” and will be taxed at your personal income tax slab rate. Also, if you’re transferring crypto between an Indian resident and a Non-Resident Indian (NRI), always ensure you follow FEMA regulations.

• Key Numbers for Taxable Gifts:
• Threshold for non-relative gifts: Over ₹50,000 in a financial year
• Taxation: The entire amount (not just the excess) is taxable
• Category: ‘Income from Other Sources’ at your slab rate

Selling Gifted Crypto? Here’s How Capital Gains Work

When you eventually sell a crypto asset you received as a tax-exempt gift, calculating capital gains is a bit unique. You won’t use the crypto’s value on the day it was gifted to you.

• Instead, your cost of acquisition will be the original purchase price paid by the donor.
• Imagine your father bought Bitcoin for ₹15 lakh and gifted it to you when it was worth ₹45 lakh.
• If you then sell that Bitcoin for ₹70 lakh, your taxable gain is ₹55 lakh (₹70 lakh minus the original ₹15 lakh).
• This gain is subject to a 30% VDA tax rate, plus any applicable surcharge and cess.
• A 1% TDS will be deducted by the buyer, which you can claim as a credit when filing your taxes.

However, if you received a taxable gift from a non-relative, the fair market value of the crypto on the date of the gift is considered your cost of acquisition. This detail can significantly change your tax calculations.

• Capital Gains Tax Rates:
• VDA Tax Rate: 30% (plus surcharge and cess)
• TDS on Sale: 1% deductible by buyer
• Example Gain: ₹55 lakh from a ₹70 lakh sale

Don’t Forget to Report: ITR Filing and Documentation

When it’s time to file your Income Tax Return (ITR), India’s framework requires you to report VDA transactions meticulously. If you’ve sold gifted crypto, you’ll need to disclose the details.

• Report the transaction under Schedule VDA, providing all acquisition and transfer details.
• Both you and the donor should keep comprehensive records, including exchange statements and transaction records.
• Also save wallet addresses, transaction hashes, the crypto’s valuation on the gifting date, and that crucial gift deed.
• If your gifted crypto is held on an international platform or wallet, remember to report it under Schedule FA (Foreign Assets) in your ITR.