Finance Minister Nirmala Sitharaman on Tuesday announced a taxation regime for virtual digital assets given the “phenomenal” increase in their trading. Many people consider this to establish the legality of private cryptocurrencies.
In the Union Budget 2022-23, the Finance Minister proposed that any income from transfer of any virtual digital assets will be be taxed at 30 per cent. Further, no deductions would be allowed except for the cost of acquisition. Any loss can not be set off, she further proposed.
The gift of the virtual digital asset would also be taxed at the hands of the recipient.
Bitcoin and Ethereum continued to trade higher.
Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co said, “There is some clarity on the taxation digital currencies. Prima facie it seems digital currencies will be taxed akin to speculative income at 30 per cent flat on a gross basis. Further the introduction of TDS on crypto-transfers will enable the government to better monitor crypto transactions.”
According to the Budget, to define the term “virtual digital asset”, a new clause (47A) is proposed to be inserted to section 2 of the Act.
“A virtual digital asset is proposed to mean any information or code or number or token (not being Indian currency or any foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value which is 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 and includes its use in any financial transaction or investment, but not limited to, investment schemes and can be transferred, stored or traded electronically.”
Non fungible token and any other token of similar nature are included in the definition, it further said.