The Government of India has proposed that the transfer of any virtual/cryptocurrency asset will be subject to a 30% tax. As announced by the finance minister in Budget 2022 today, no deductions will be allowed for other than the acquisition costs, and losses will be prohibited from being carried forward.
Despite the fact that she said that the gifts will be taxed on the recipients’ hands, she added that there will also be a 1 percent tax deducted at source (TDS) on the payments made for the transfer of digital assets. Additionally, it was announced that any losses incurred in the trade of digital assets cannot be offset against any other gains resulting from the same transaction.
Any income from virtual digital assets is taxable at 30 per cent, There will be no deduction with exception of the cost of acquisition. The TDS is applicable beyond a specified monetary threshold, and the gift of virtual currencies is taxable in the hands of the recipient.
Nirmala Sitharaman – Finance Minister, India
The finance minister Nirmala Sitharaman announced in her Union Budget 2022 speech that India’s central bank, the Reserve Bank of India (RBI), will introduce a digital currency in the next financial year that would use blockchain technology as well as other support technologies.
Introduction of a central bank digital currency will give a big boost to the digital economy, Digital currency will also lead to a more efficient and cheaper currency management system.
Nirmala Sitharaman – Finance Minister, India
According to Finance Act : Virtual digital asset mean any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited ..
With effect from April 1, 2023, the 115BBG sections on income from virtual digital assets will be introduced :
1 : Where the total income of an assessee includes any income from the transfer of any virtual digital asset, the income-tax payable shall be the aggregate of
- (a) the amount of income-tax calculated on the income from transfer of such virtual digital asset at the rate of thirty percent.; and
- (b) the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a).
2 : Notwithstanding anything contained in any other provision of this Act
- (a) no deduction in respect of any expenditure (other than cost of acquisition) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income referred to in clause (a) of sub-section (1); and
- (b) no set off of loss from transfer of the virtual digital asset computed under clause (a) of sub-section (1) shall be allowed against income computed under any other provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years.
Upon the introduction of this amendment, it will take effect as of 1st April, 2023 and will accordingly apply for the assessment year 2023-24 and subsequent assessment years.
It is interesting to note how our government is beginning to recognize crypto as an emerging asset class given how our FM was referring to it as virtual digital asset. The biggest development today, however, was a clarity on crypto taxation. This will add the much needed recognition to the crypto ecosystem of India. We also hope to this development removes any ambiguity for banks, and they can provide financial services to the crypto industry.
WazirX CEO Nischal Shetty
With Budget 2022, the investors have no longer have any doubts about crypto, and this will ultimately help them to make a rational choice while making a decision to invest in this risky asset class.
