A whole new range of gifts are becoming popular with the growth in technology: from online gift vouchers to virtual assets. However, the recent budget introduced a tax on gifting cryptocurrencies worth more than Rs 50,000.
The Budget specified that gifts in the form of cryptos or virtual digital assets will be taxed in the hands of the recipient if they are worth more than Rs50,000. However, such gifts will not be taxable in the hands of the recipients if they are given by a relative, including parents, children, spouse and siblings. This will come into effect from April 1, 2023.
Is Gifting Cryptos Popular In India?
A survey by cryptocurrency exchange and wallet BlockFi that covered 1,262 US citizens between 18 to 65 years of age found that cryptocurrency was one of the favourite options for gifting in 2021, particularly Bitcoin.
Though there are no specific numbers available on gifting of cryptocurrencies, the number of takers for virtual assets has grown to 10-15 million, according to industry estimates. Also, given that the Budget went ahead to tax gifts in the form of virtual assets, the growing numbers can’t be ignored.
You can gift cryptos or non-fungible tokens (NFTs) through a cryptocurrency exchange. If you are not an existing investor, you would need to open an account after doing your KYC. Once in, you could purchase digital currencies and send them to the wallet address of the person whom you want to gift.
Some exchanges, including Coinbase, Binance, CashApp, and Robinhood, also allow their subscribers to buy crypto gift cards.
Why It May Not Make Sense
While you may be a crypto enthusiast, it may not be necessary that the person you are gifting the asset to also feels as excited. “Some people may not want to have cryptocurrency into their portfolios and may not see value in having it. The gift itself can grow up exponentially or it can turn into nothing, as it is a volatile asset. Cryptocurrency gifts worth less than $15,000 are not taxable until the recipient decides to sell at profit,” says Kumar Gaurav, founder and CEO of Cashaa, a crypto banking platform.
Besides, the person receiving the gift will need to have a crypto wallet. “The recipient has to open an account with an exchange to receive the gift. The process is a little complex. Also, the tax proposed is a flat 30 per cent and the recipient needs to pay that in cash. So, at present, it is not a great idea,” says Kashif Raza, founder of Bitinning, an online platform focused on crypto awareness.
Last but not the least, cryptos are volatile assets and just because you are ready to bear the risk may not mean the other person would be willing too.
