In the constantly evolving landscape of digital assets, understanding their regulatory aspects is paramount. In this regard, we recently had an engaging discussion with CA Sonu Jain, a well-known Chartered Accountant and Crypto Tax Expert with KoinX. With a rich experience of over three years in the Crypto tax space, Sonu Jain has extended his expertise to numerous Indian and foreign-based Crypto Investors, startups, and businesses in the areas of Crypto Tax Advisory, Tax structuring, and Tax filing services.
Conducting the interview is Minisha, who is part of the brand marketing team at Okto, a DeFi self-custody wallet app. Minisha, with her keen interest in DeFi, sought to clarify various aspects of crypto taxation for the benefit of Okto's users.
In the dialogue that followed, Sonu Jain adeptly shed light on a wide array of topics, such as Virtual Digital Assets (VDAs), the taxation of DeFi assets in India, and the differences between DeFi and CeFi taxation. Additionally, he also elucidated how KoinX, in collaboration with Okto, is making tax filing easier for its users. Here are the key takeaways from the conversation:
Minisha: What are VDAs?
CA Sonu Jain: The Income Tax Act does not include the term cryptocurrency; instead, it uses the word “Virtual Digital Asset” (VDA), which due to its elaborate definition, includes Cryptocurrencies and NFTs. The taxation of income from the transfer of VDAs includes a profit tax of 30%, and profit computation as Sale value less Buy value. There are no deductions for any expense except Buy value, and no set-off of any losses nor carry forward of losses is allowed.
Minisha: How are DeFi assets taxed in India?
CA Sonu Jain: There is no specific guidance from the Income tax department on the taxation of various types of DeFi Income; as a result, we will have to refer to the general Income tax guidelines for further guidance. Income from trading/swapping Virtual Digital Assets will be taxed at a flat rate of 30% (plus surcharge and cess) without allowing a deduction for any expenses like gas fees. Income from staking, mining, and airdrops will be taxed at applicable Income tax slab rates on receipt. Subsequent sales will be taxed as Income from VDA at 30%.
Minisha: How is DeFi taxation different from CeFi taxation?
CA Sonu Jain: The Income Tax law in India does not differentiate between DeFi and CeFi transactions. Instead, any Income from VDAs is taxed at 30% as per section 115BBH.
Minisha: How does KoinX make tax filing convenient for Okto users in India?
CA Sonu Jain: This collaboration allows Okto users to sync their Okto crypto wallet with KoinX effortlessly. By doing so, Okto users gain access to a wide range of powerful features and benefits KoinX offers. They can view and download comprehensive tax reports that adhere to government guidelines within seconds, making it significantly easier to manage their crypto taxes.
Here's your super simple guide to tax freedom:
Step 1: Launch yourself over to KoinX.
Step 2: Locate 'Integrations and click on 'Add Integration'
Step 3 : Search 'Okto and click on it.
Step 4 : Choose the blockchain/network you've got your funds on.
Step 5: Select 'Okto' for Wallet Connect
Step 6: Fire up your Okto app, connect KoinX, and BOOM! Instant tax report for FY 2022-23.
The Tax filing deadline for Crypto Investors in India is 31 July. Investors may also file belated returns up to 31 Dec with a fine of Rs.5,000 (Rs.1000 if Income is up to Rs.5 Lacs).
Indian tax law levies a tax on the global Income of an Indian Investor. As a result, Trading Income from DeFi will need to be disclosed in ITR under Schedule VDA and taxed at 30%.
Staking Income is taxed on receipt at the applicable Income tax slab rate based on the value in INR of the tokens received. Subsequent sales will be taxed under VDA at 30%.