Home / Markets / Cryptocurrency /  Giving cryptocurrencies as Diwali gifts? Know taxes on them

The cryptocurrency market has gained quite a fanbase in the past few years. Companies and individuals across countries have warmed up to using cryptos as an investment pool. The popularity of cryptos is vast and in current times they are even seen as an alternative to cash which means you can buy goods and services, receive salaries, etc. Despite the market being volatile and highly sensitive driven, demand for cryptocurrencies has not budged instead only accelerated. That being said, one would wonder if cryptocurrencies can be given as gifts, especially during the upcoming Diwali festival. However, that's not all, there is certain taxability that needs to be taken into consideration upon receiving cryptos as gifts.

Cryptos are digital currencies and one of the alternative forms of payment that are developed through encryption algorithms. They perform as both currency and virtual accounting systems. 

 

According to Income Tax guidelines, gifts from the taxation point of view are defined as:

- any sum of money received (monetary gift)

- specified movable properties (gift of movable property) specified movable properties received at a reduced price (i.e. for inadequate consideration)

- immovable properties received without consideration (gift of immovable property)

= and immovable properties acquired at a reduced price.

Simply put, taxes are applicable on monetary gifts, however, a certain limit of exemption is provided in a financial year.

In regards to cryptocurrencies as Diwali gifts to an individual, Abhijit Shukla, CEO & Founder of Revolution Games said, "The interest in NFTs and cryptocurrencies, as a form of currency, is on the rise, especially among GenZ and millennials. In fact, cryptocurrencies as Diwali gifts are being and will be touted, not just by corporates but by individuals. In fact, crypto and virtual rewards also do not confer any tax unless they are in excess of 50,000."

Further, Shukla added, "There is a mentality shift and more acceptance, as people want a token! Cryptocurrency forms a crucial part of this generation's retirement portfolio, and this will help the industry a tipping point in India. This movement will be conducive for the crypto market's growth in India."

Explaining tax implications, Ashwani Kumar, Founder, and CEO, HelperWorld said, "As per the income tax act, govt levies tax on the gift received in cash, immovable property, or specified movable assets, like shares, jewellery, painting, etc. The Union Budget 2022 proposes to include virtual digital assets within the scope of moveable assets. Thus, the gift of virtual digital assets (like Bitcoin, Tokens, or NFTs) from specified relatives (parents, siblings, children, grandparents, grandchildren, parents-in-law, etc.) is not taxable in the hands of the recipient. Meanwhile, the virtual digital assets in excess of 50,000 from non-relatives are taxable. In case the total value of all the gifts received by a bride or bridegroom on the occasion of marriage is tax-free. However, the parents of the bride or bridegroom cannot take benefit from an exemption."

Also, Kumar pointed out that as per the government tax slab, if an employer offers any gift voucher in kind or cash amounting to less than 5,000 during the financial year, then it is wholly exempt. However, if the value of the gift exceeds 5,000, then the whole amount is treated as part of salary and taxed as 'perquisite'.

The five-day Diwali festival will begin from October 22 to October 26.

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