You could be planning to gift digital assets like NFTs (non-fungible tokens) and cryptocurrencies this Diwali. However, beware of taxation.
You can hardly separate festivals and gifting. Moreover, celebrations are more fulfilling and joyous when you endow your loved ones – family, acquaintances, and friends. If you want to gift someone something unique this festive season, you can opt for virtual digital assets (VDAs), non-fungible tokens (NFTs), and cryptocurrencies.
In that context, you should consider the taxation stance for these products. Nirmala Sitharaman of Finance proposed a 30% taxation of virtual digital assets on any transfer or income of the products without deductions.
That brings two questions. How will the authorities tax crypto gifting? Moreover, how will the same work for individuals that receive digital assets as gifts?
Taxation on Your Gifted Crypto
The Income Tax rules place taxation on crypto donations under the following;
- Any amount of cash received (monetary gift).
- Quantified properties and definite movable properties are received at reduced prices, meaning for scarce consideration.
- Immovable property gifts received without consideration and those you acquire at reduced prices.
Cryptocurrency taxation consultant and chartered accountant Tarun Modi stated that the Income Tax Act says any VDAs gifting, including NFTs and cryptos, will endure taxation on the receiver’s hands if the value of the gifts in a year exceeds Rs 50,000.
He added that anyone receiving gifts in NFTs or cryptos should asses the asset’s fair market value. A cumulative value surpassing Rs. 50,000 will attract taxation in the receiver’s hand, with income tax discharged on the gift.
Modi added that an exemption is when the gift is from immediate relatives, such as a month, spouse, father, etc.
What About Gifts from Employers?
Gupta revealed that donations to employees amid the festive season, including Diwali, will attract taxation for the employee. Grants received on occasion or as an award are taxable, similar to performance bonuses. The rules allow exemptions on gifts worth up to Rs. 5,000 by the employer or in cash.
What are your views about the above crypto taxation report? Feel free to leave a comment in the section below.