The cryptocurrency market has gained quite a fan following over the years. Companies and people from all over the world have embraced cryptocurrency as an investment vehicle. The popularity of crypto is very high and they are also seen as an alternative to cash in the present day, which means you can buy goods and services, get a salary, etc.
Despite market volatility and highly sensitive operations, the demand for cryptocurrencies has not waned. However, not only, certain tax liabilities should be taken into account when receiving crypto as a gift.
Crypts are digital currencies and one of the alternative forms of payment that have been developed through encryption algorithms. They serve as currencies as well as virtual accounting systems.
Gifts are taxed in the following ways, according to Income Tax Guidelines:
– Any cash amount obtained (monetary gift)
– Specified movable properties (i.e., for inadequate consideration) specified movable properties received at a discount (i.e., for insufficient consideration)
– Immovable properties received without consideration
– and immovable properties acquired at a decreased price.
Simply put, taxes are applicable on monetary gifts. However, a certain threshold of exemption is provided in a financial year.
In terms of cryptocurrencies as Diwali presents, Abhijit Shukla, CEO & Founder of Revolution Games, stated, “Interest in NFTs and cryptocurrencies as a form of cash is growing, particularly among Generation Z and millennials. In reality, cryptocurrencies are being and will be promoted as Diwali presents not only by corporations but also by individuals. Unless the value exceeds $50,000, crypto and virtual awards are tax-free.
Shukla went on to say, “People want a symbol, so there is a mindset shift and greater acceptance! Cryptocurrency is an important element of this generation’s retirement portfolio, and this will contribute to the market reaching a tipping point in India. This effort would help the Indian cryptocurrency business expand. ”
According to the income tax report, “The government imposes a tax on presents received in cash, immovable property, or certain transportable assets like shares, jewellery, artworks, and so on.” It is explained by Ashwani Kumar, Founder, and CEO of Helper World.
The Union Budget 2022 recommends including virtual digital assets in the definition of movable assets. As a result, gifts of virtual digital assets (such as BitCoin, Tokens, or NFTs) from designated relatives (parents, siblings, children, grandparents, grandchildren, parents-in-law, and so on) are not taxable in the recipient’s hands. Meanwhile, non-relatives’ virtual digital assets over $50,000 are taxed. If the entire value of all presents received by a bride or bridegroom on the occasion of their marriage is exempt from taxation.
Also, according to the government tax slab, if an employer provides a gift certificate in kind or cash totaling less than $5,000 throughout the fiscal year, it is entirely excluded. If the value of the gift exceeds $5,000, the entire sum is recognized as salary and taxed as a “prerequisite.”
The five-day Diwali celebration will take place from October 22 to October 26.