Here’s what to do if you missed filing crypto gains in ITR

Have you mentioned your crypto assets in the income tax return (ITR) this year? If not, it is time to revise the tax return. The last date for filing ITR was 31 July, and as per government statistics, more than 58.3 million returns had been filed when the deadline ended that day.

Starting from the ongoing financial year, the government has introduced a special taxation regime for crypto assets or virtual digital assets (VDAs). Under this, profits from the sale of crypto assets are taxed at a flat rate of 30%, irrespective of the tax slab, and without the benefits of offset and carry forward of losses.

For example, investors in equities can offset the loss in one stock against another, while carrying forward both short-term and long-term losses for eight assessment years. That, however, is not applicable in this case.

A new section, 194S, has been inserted in the Income-tax (I-T) Act for the deduction of tax from the payment of consideration for the transfer of digital assets. In addition, a 1% tax deducted at source (TDS) will be applicable on the transfer of such assets over a certain threshold.

The lack of specific taxation norms for crypto assets in the last financial year led some investors to believe they don’t have to pay tax on gains from VDAs. However, that is not the case.

Tax experts say that taxation norms apart, individuals have to pay tax on gains from crypto assets for the previous financial years as well.

“For the last year, gains were treated as normal capital gains, as there was no special tax regime in the last financial year for crypto assets. Therefore, for reporting purposes in the ITR, gains were taxed as capital gains or business income,” said Naveen Wadhwa, deputy general manager, Taxmann.

Further, in the case of capital gains, individuals don’t need to mention the source of the gains. Therefore, gains from crypto were taxed just like gold or art.

As a benefit in the last financial year, individuals were allowed to set-off long-term or short-term losses from crypto assets with other capital gains, subject to Section 70 and 71 of the Income-tax Act.

“If an individual forgets to file details of crypto gains in the ITR within the deadline of 31 July, this would be treated as under reporting or misreporting of income, and invites a penalty of up to 200% of the tax evaded. Individuals could also face prosecution as well,” said Wadhwa.

Tax experts suggest that individuals who have failed to report crypto gains should immediately revise their returns. People can go to the income tax portal, where after logging into their account, they would find the option of filing a revised return.

Taxpayers will be liable for a penalty of ₹5,000 in case the delay in filing returns is beyond 31 July, as per Section 234F of the I-T act. If the income does not exceed ₹5 lakh, then the penalty is ₹1,000, which is has to be mandatorily paid by the taxpayer before filing the revised ITR.