The Finance Ministry does not expect any significant collection from new income tax structure on Virtual Digital Assets (VDA), popularly known as Crypto, in the first advance tax collection for which the due date is June 15.

Meanwhile, Income Tax Department is readying Frequently Asked Questions (FAQs) for VDA taxation which are to be released shortly. New taxation regime for VDA came into effect from April 1. First payout under this regime is due on June 15 for investors who are required to pay advance tax. 

“Cryptos have seen a huge fall during current fiscal and people are loosing money so who will pay advance tax now,” a top Finance Ministry official told BusinesLine. The Finance Act, 2022, has proposed that any income from the transfer of VDA will be taxed at the rate of 30 per cent. Also, as per the provisions of Section 115 BBH in the Income Tax Act, 1961, loss from the transfer of VDA will not be allowed to be set off against income arising from transfer of another VDA.

Usually, the tax is to be paid when the income is earned. Still, under the tax provisions of advance tax, the payer has to estimate the income for the entire year. And based on this estimate, the tax is paid at specific time intervals. As per section 208 of the Income Tax Act 1961, every person whose estimated tax liability for the year is more than or equal to Rs 10,000 is liable to pay advance tax. 

One can pay the advance tax in four instalments by 15th day of June, September, December and March. On or before June 15, 15 per cent of advance tax is payable. By September 15, it should be 45 per cent of payment less-amount already paid. By December 15, it will be 75 per cent of advance tax less already paid and balance amount by March 15. Non-payment of advance tax will invite interest.  

FAQs to bring clarity

The official quoted above also said the Income Tax Department is working on detailed FAQs along with rules to bring clarity on various issue related with taxation on VDA. “It should be out much before the due date of first advance tax instalment, so that assesses should not have any doubt in tax compliance,” he said.

Tax officials have already clarified that they will rely more on voluntary disclosure on acquisition cost of VDA for new regime of taxation. Accordingly, the department will rely on the price of acquisition mentioned by the investor and accordingly, income earned to be taken for the taxation. However, in case of even the slightest doubt, the disclosures will be thoroughly re-examined, officials said.

Earlier, during the Budget Session, in response to one question, Minister of State for Finance Pankaj Chaudhary had said in a written reply that infrastructure costs incurred in the mining of VDA will not be treated as cost of acquisition as the same will be in the nature of capital expenditure which is not allowable as deduction as per the provisions of the Income Tax Act. Now some clarity is expected on withholding tax provisions on crypto transactions.