In India, cryptocurrency is defined as a Virtual Digital Asset i.e. VDA. Under Budget 2022, the finance minister announced the provisions for taxation on cryptocurrency, NFT (non-Fungible Token), and other VDA (Virtual Digital Asset). Further, they also introduced provisions for tax on gifting crypto, NFTs, etc. As per the Income Tax Act, gift of cryptocurrency, NFTs, etc shall be taxable in the hands of the recipient.
Forms of Gifting Crypto
A crypto trader or investor can gift cryptocurrency through the cryptocurrency exchange using gift cards, crypto paper wallet, crypto token, etc.
- Crypto Gift Cards – Crypto traders can buy gift cards from the cryptocurrency exchange for the purpose of gifting them to friends and relatives.
- Crypto Paper Wallet – A crypto trader can also gift a crypto paper wallet i.e. a piece of paper with a single private key and bitcoin address.
- A Crypto Token – A crypto trader can gift a crypto token i.e. a virtual currency token or a denomination of a cryptocurrency.
Tax on Gifting Crypto
Section 56 of the Income Tax Act levies provision for taxation of gifts of immovable property, cash, and specified movable assets such as shares, jewellery, etc. Under Budget 2022, the finance minister amended Section 56 for taxation of gifts to include ‘Virtual Digital Asset’ in the definition of property i.e. movable assets. A Virtual Digital Asset i.e. VDA includes cryptocurrency, NFT, and any other notified digital asset. Below is the tax treatment on the gifting of crypto, NFT, and other VDAs. It is taxable in hands of the receiver applicable from FY 2022-23:
|VDA Gift with value up to INR 50,000||Exempt from tax|
|VDA Gift with value exceeding INR 50,000 received from relative||Exempt from tax|
|Gift of VDA with value exceeding INR 50,000 received from non-relative||Taxable in hands of receiver|
|Received on occassion of marriage, via inheritance or will or in contemplation of death||Exempt from tax|
Definition of relative for tax on gifting crypto – spouse, children, parents of individual or spouse, brother/sister of individual or spouse, brother/sister of parents of individual or spouse.
Tax on giving a Crypto gift
Check the tax provisions for the giver of crypto gift on giving the gift and on sale of such gift by the receiver.
Tax on transfer of crypto gift for giver
As per Section 2(14) of the Income Tax Act, a virtual digital asset is a Capital Asset. The transfer of a Capital Asset is taxable as Capital Gains. However, the definition of ‘transfer’ as per Section 47 specifically excludes gifts. Thus, the gift of cryptocurrency, NFT, and other VDA is not taxable in the hands of the sender.
Tax on sale of crypto gift for giver
- The sale of crypto gifted to the receiver is not taxable in the hands of the sender of the gift.
- Clubbing of Income – If the receiver of the gifted crypto is a spouse or minor child, any income that arises directly or indirectly from such asset is clubbed with the income of the giver of the crypto gift.
Tax on receiving a Crypto gift
Check the tax provisions for the recipient of crypto gift on receiving the gift and on sale of such gift.
Tax on transfer of crypto gift for receiver
Crypto gift is taxable for the receiver if the monetary value exceeds INR 50,000 and is received from a non-relative. Further, crypto gift received on occasion of marriage or inheritance or in contemplation of death is not taxable. Such gift is taxable at slab rates under the head IFOS (Income from Other Sources).
Tax on sale of crypto gift for receiver
Capital Gains tax would arise on the sale or conversion of cryptocurrency. To calculate the tax on gifted crypto, here are important points to consider:
- Period of Holding – Calculate the holding period from the date of purchase by the previous owner i.e. sender of gift to the date of sale by the receiver of the gift.
- LTCG – Virtual Digital Asset (VDA) held for more than 36 months from date of purchase by the sender to date of sale.
- STCG – Virtual Digital Asset (VDA) held for up to 36 months from date of purchase by the sender to date of sale.
- Purchase Date – The date of purchase by the previous owner i.e. sender of the gift
- Purchase Value – The value of the purchase of the previous owner i.e. sender of the gift
- Sale Date – The date of sale by the receiver of the gift
- Sale Value – The value of the sale by the receiver of the gift
- Tax Liability – Tax rate on sale of cryptocurrency is 30% without claiming deductions for cost of acquisition, cost of improvement, or transfer expenses
|Gift of Virtual Digital Asset||Not taxable||Exempt Income or IFOS Income|
|Sale of Virtual Digital Asset||Not taxable||Capital Gains|
Clubbing of Income – If the receiver of the gifted crypto is a spouse or minor child, any income that arises directly or indirectly from such asset is clubbed with the income of the giver of the crypto gift.
Under Budget 2022, it was announced that the gift of crypto shall be taxable in the hands of the receiver. Based on the changes in Finance Bill 2022, the tax normal income tax provisions as per Section 56 apply to the gift of cryptocurrency too. Therefore, the gifting of cryptocurrency, NFT, or other Virtual Digital Assets is taxable in the hands of the receiver if received from a non-relative for a value exceeding INR 50,000.
Yes. You can give cryptocurrency as a gift. However, there are tax implications for the same. The receiver of the gift is liable to pay tax on a crypto gift received from a non-relative in excess of INR 50,000. The giver of the crypto gift is not liable to pay any tax on the same.
Yes. If you have received a gift of cryptocurrency from a person other than a relative of value exceeding INR 50,000, you must report it under the head IFOS in the ITR and pay tax at slab rates. Further, when you sell the crypto gift, you must report it under the head Capital Gains and pay tax at 30%.