Crypto & Virtual Digital Assets

Crypto & Virtual Digital Assets — the law in short

Every authority in this library on crypto & virtual digital assets, with what each one decided.

• Internet and Mobile Association of India v RBI Supreme CourtCuts both ways
  The AO's position is that dealing in crypto was illegal in the years under assessment. Is there Supreme Court authority the other way?
  Yes, on the regulatory question. The Supreme Court set aside the RBI's April 2018 circular that had barred regulated entities from providing services to persons dealing in virtual currencies, holding the measure disproportionate, and recorded that RBI itself had not banned virtual currencies. The judgment also records that courts in different jurisdictions have placed virtual currencies in categories ranging from property to commodity. It decides nothing about the Income-tax Act.
• Rhutikumari v Zanmai Labs High CourtCuts both waysValidity unconfirmed
  The AO says crypto was not property at all before the 2022 amendments, so my gain cannot be a capital gain. Is there a High Court holding that crypto is property?
  Yes, but from outside the tax jurisdiction. Hearing an application for interim protection in a WazirX dispute, the Madras High Court held that crypto currency is property — not tangible property and not currency, but property capable of being enjoyed, possessed in a beneficial form and held in trust. It is a civil ruling under the Arbitration and Conciliation Act, not a decision on the Income-tax Act, so it supports the characterisation argument without deciding any head of income.
• Parmesh Chand Yadav v ITO High CourtHelps departmentSuperseded by amendment
  The AO has issued a s.148A notice on crypto exchange data showing Rs 4.65 crore of transactions. I have given my bank statements and my return — is that enough to stop the s.148 notice?
  No, not on these facts. The Court held that bank statements alone do not verify what the crypto transactions were, that the assessee ought to have produced the crypto currency ledger, and that the officer's brief consideration of the reply satisfied s.148A. The writ against the s.148 notice failed, with liberty to produce the ledger in the reassessment itself.
• Brijesh Poddar v ITO ITATHelps taxpayerValidity unconfirmed
  I borrowed money to buy crypto. Can I deduct the interest against my 115BBH income?
  That is what a single note reports, and nothing about the order can be checked. The judgment could not be found in a full-text subscription research database on a search of the party name, the appeal number or the section, and there is no decision of any Tribunal or High Court on s.115BBH in that database at all. What the note reports is that interest on funds borrowed exclusively to acquire virtual digital assets, up to the date of acquisition, was treated as part of the cost of acquisition, s.115BBH(2)(a) barring every other deduction but not defining that expression. Treat it as a line of argument, not as authority.
• Raunaq Prakash Jain v ITO ITATHelps taxpayerValidity unconfirmed
  I sold Bitcoin in FY 2020-21, before the VDA regime — capital gains or income from other sources?
  Capital gains, for that year. For AY 2021-22 Bitcoin was a capital asset under s.2(14), so the gain fell under the capital gains head and not s.56, and a holding period of more than three years made it long-term and eligible for s.54F relief on reinvestment in property. This decides only years before the virtual digital asset regime took effect on 1 April 2022; for years inside that regime s.115BBH governs and this answer does not carry across.
• CBDT Guidance Note on crypto-asset reporting CBDT Circulars & InstructionsHelps departmentValidity unconfirmed
  Do I have to list every crypto trade separately in Schedule VDA, or can I report the net gain?
  Every trade separately. Schedule VDA requires transaction-wise disclosure — type of VDA, date of acquisition, date of transfer, sale consideration, cost of acquisition, income from the transfer and the s.194S TDS — and consolidating gains across transactions is treated as a compliance error. Alongside that, crypto-asset service providers have their own duty to report crypto transactions in the prescribed form and to run due diligence to identify reportable persons.
• CBDT Notification 19/2026 on crypto reporting CBDT Circulars & InstructionsHelps department
  Do I have to report my crypto holdings now, or does the exchange do it for me?
  The platform does. Reporting Crypto-Asset Service Providers — Indian exchanges, custodians, wallet providers, broker-dealer platforms and offshore providers servicing Indian users — must report crypto-asset transactions in Form 167 under rules 241 to 244. The compliance burden is placed on the platforms, not on individual investors.
• CBDT Circular 23/2022 - the VDA regime's first year CBDT Circulars & InstructionsCuts both ways
  From which assessment year does the flat 30% charge on crypto actually begin, and has the Board itself said anything about set-off?
  Assessment year 2023-24, that is financial year 2022-23. Paragraph 6 of the Board's Explanatory Notes to the Finance Act 2022 records that the s.115BBH amendment "takes effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years". The same paragraph restates the set-off bar in the Board's own words - no set off of any loss arising from transfer of a virtual digital asset against any income computed under any provision of the Act, and no carry forward. The 1% under s.194S is separately recorded as effective from 1st July, 2022.
• CBDT Notifications 74 & 75/2022 CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  Are gift cards, loyalty points and NFTs backed by a physical asset caught by the crypto tax rules?
  No. Notification 74/2022 excludes gift cards, vouchers, reward points and loyalty cards from the s.2(47A) definition, and Notification 75/2022 excludes physical NFTs — tokens whose transfer results in transfer of ownership of an underlying tangible asset. What remains inside the regime is crypto-assets and notified NFTs.
• Notification 73/2022 — Form 26QF for exchanges CBDT Circulars & InstructionsCuts both ways
  The exchange agreed under the CBDT guidelines to pay the 1% on its own sale to me. How does that get reported, and where do I see it?
  Through Form 26QF, filed quarterly by the exchange. Where an exchange has agreed, under the guidelines issued under s.194S(6), to pay the tax on a transfer of a virtual digital asset owned by it instead of the buyer deducting, rule 31A(1) requires the exchange to deliver a quarterly statement of those transactions in Form 26QF. Sub-rule (4E) also requires the exchange to furnish particulars of amounts paid or credited on which no tax was deducted in accordance with the guidelines.
• CBDT Circular 14/2022 CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I bought crypto directly from the seller, no exchange — do I deduct? And what if I paid in crypto rather than cash?
  You deduct. In a peer-to-peer transfer the buyer is the person paying the consideration and must deduct under s.194S. Where the consideration is in kind, or is itself another virtual digital asset, the payer must ensure the tax has actually been paid before releasing the consideration — and on a swap each party is both buyer and seller, so each deducts on the transfer it makes.
• CBDT Circular 13/2022 CBDT Circulars & InstructionsCuts both ways
  I trade crypto on an exchange. Who deducts the 1% under s.194S, on what amount, and what changes if a broker is in the chain?
  The exchange. Where a transfer takes place on or through an exchange that is not itself the owner, only the exchange crediting or paying the seller deducts. Where a broker is in the chain, the obligation moves to the broker only if there is a written agreement between the exchange and the broker allocating it. Where the exchange itself owns the asset, the buyer may by written agreement leave the deduction and payment to the exchange.
• Notification 67/2022 — the 194S forms CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I deducted 1% under s.194S on a peer-to-peer purchase. Which challan and which certificate, and by when?
  Form 26QE and Form 16E, on a thirty-day clock. A specified person deducting under s.194S pays the tax within thirty days from the end of the month of deduction, accompanied by a challan-cum-statement in Form 26QE filed electronically within the same thirty days, and issues the certificate in Form 16E to the payee within fifteen days of that due date. Form 26Q was substituted at the same time to carry ss.194R and 194S for deductors who are not specified persons.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.