As the government prepares to implement the Finance Bill governing all virtual digital assets, including cryptocurrencies, it is working on developing a FAQ on the taxation of the same. The purpose of these FAQ sheets will be to give precise explanations on the applicability of Income Tax and GST to the users. virtual digital assetA report has said recently.
The set of frequently asked questions (FAQs), which are being prepared by the Department of Economic Affairs (DEA), RBI and the Department of Revenue, will also be examined by the Law Ministry, news agency PTI quoted an official as saying. who knows about it. Talk, as in saying. frequently Asked question taxation of cryptocurrency And work on virtual digital assets is underway. Though the FAQs are for informational purposes and do not have legal validity, the Law Ministry’s opinion is being sought to ensure that there are no loopholes,” the person told PTI on condition of anonymity. Told.
Three departments – RBI, DEA and Department of Revenue – are preparing these FAQs to ensure that there is complete clarity on the taxation aspect mentioned in the bill. This applies to regional tax offices as well as those dealing with cryptocurrencies and other virtual digital assets.
This year’s budget has focused on introducing the new Finance Bill, which gives a much-anticipated perspective on levying income tax on crypto assets, or virtual digital assets. As per the provisions of the bill, from April 1 this year, 30 per cent income tax plus cess and surcharge will be levied on transactions involving virtual digital assets. This would be done in the same way that tax law treats winnings from horse racing or other speculative transactions.
Budget 2022-23 also proposes 1 per cent TDS (tax deducted at source) on payment of virtual currencies exceeding Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The TDS limit will be Rs 50,000 per annum for specified persons, including individuals/HUFs who are required to get their accounts audited under the IT Act. The provisions relating to 1 per cent TDS will come into effect from July 1, 2022, while gains will be taxed with effect from April 1.
From the perspective of GST, the FAQs are likely to provide clarity on whether cryptocurrency is a goods or a service or not. Currently, 18 percent Goods and Services Tax (GST) is levied only on service provided by crypto exchanges and is classified as financial services. The classification of cryptocurrencies is not clearly mentioned in the GST law. In the absence of legislation regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies this as an ‘actionable claim’.
An actionable claim is a claim that can be made by a creditor for any type of debt other than a loan secured by mortgage of immovable property. Separately, the government is working on a law to regulate cryptocurrencies, but no draft has been publicly released yet.
(with PTI inputs)
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