In the Union Budget 2022, Finance Minister Nirmala Sitharaman announced that India will levy a stable tax on cryptocurrencies and virtual assets including non-fungible tokens or NFTs at a flat rate of 30 per cent. Budget 2022 also proposes a provision for deduction of tax at source at 1 per cent levied on payments made from transfer of virtual assets. Cryptocurrency exchanges and traders have welcomed the much-anticipated policy framework for digital tokens. In the article, we will talk about the proposed cryptocurrency tax in detail, take a look
Budget 2022 introduced a new crypto tax
Budget 2022 proposes to introduce a new section 115BBH to levy income tax on cryptocurrencies and other virtual assets. Presenting the Budget for 2022, the Finance Minister said, “Accordingly, for the taxation of virtual digital assets, I propose to provide that income from transfer of any virtual digital asset is taxed at the rate of 30 per cent. Will go.”
“The proposed section 115BBH seeks to provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the income-tax payable shall be the aggregate of the amount of income-tax computed on the income of transfer of any virtual digital assets at the rate of 30 per cent and the amount of income-tax with which the assessee would have been chargeable, if the total income of the assessee becomes less than the aggregate of the income from transfer of virtual digital assets,” the Budget 2022 memorandum said.
crypto tax decoded
We’ve Explained What the New Proposed Crypto Tax Means for You
1) Income from sale of virtual assets such as cryptocurrencies, NFTs will be taxed at a flat rate of 30 percent
2) There shall be no deduction for any expenditure incurred on cryptocurrency transactions, other than the cost of acquiring such assets.
3) Losses from cryptocurrency or virtual assets cannot be set-off against any other income (shares or mutual funds) of the taxpayer.
4) Losses from digital assets cannot be carried forward to the next year
5) In addition, any payment of proceeds from the sale of digital assets to a taxpayer will attract 1 per cent TDS on transactions exceeding Rs 50,000 in a year.
6) Gifting of cryptocurrencies and NFTs will also attract tax to the recipient.
Example: If you have sold a virtual digital asset worth Rs 1 lakh and the cost of acquisition is Rs 20,000. The net proceeds from the sale of the virtual asset would be Rs 80,000. (Rs. 1,00,000 to Rs. 20,000). According to the new Income Tax Act, the tax liability will be Rs 24,000. It should be mentioned that loss of virtual property can be settled against loss of virtual property.
Now the biggest question is what would be considered a virtual asset
What are Virtual Assets?
Clarifying what would be a virtual asset, the budget memorandum said, “It is proposed to insert a new clause (47A) in section 2 of the virtual digital asset, Act. As per the proposed new clause, a virtual digital asset shall mean Any information or code or number or token (not being Indian currency or any foreign currency), by whatever name called, through cryptographic means or otherwise, is proposed to provide a digital representation with or without value of consideration, with a promise or representation of implied value, or serves as a store of value or a unit of account and its use in any financial transaction or investment, including, but not limited to, investment plans and electronic form may be transferred, stored or traded.
“Non-fungible tokens and any other token of a similar nature are included in the definition,” it further added.
Explaining it simply, Shivam Thakral, Member of the Blockchain and Crypto Assets Council (BACC) and CEO of BuyUCoin, said, “Virtual assets include all cryptocurrencies that can be traded on multiple platforms in India, as well as all types of of NFTs, both old and new, such as lands and other virtual experiences purchased on the Metaverse platform,” he said.
When will the crypto tax be implemented?
The new proposed cryptocurrency tax assessment will be applicable from the year 2023-24. This means that in FY 2022-23 all your income from crypto transactions will be taxed at the rate of 30 percent. Investors will have to pay tax as per the extant taxation rules for the financial year 2021-22.
“The tax structure makes it such that crypto coins and tokens will be treated as assets rather than currencies. However this will boost trading volume and result in a higher proportion of the population becoming first-time crypto retail investors. This will be because The speculation that ‘crypto is banned in India’ has come to an end,” said Atharva Sabnis, Member of the Blockchain and Crypto Assets Council (BACC) and Founder and CEO of NFT Labs, Inc.
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