About Cryptocurrency
About Cryptocurrency
India has nearly 15-20 million cryptocurrencies with total holdings of above $5 billion which shows vast interest among cryptocurrency investors. With this rapid growth, several crypto- unicorns are emerging. The estimates also highlight that the possible contribution of digital assets will be at $1.1 trillion by 2032.
In this year’s Union Budget 2022, Finance Minister Nirmala Sitharaman announced the proposal declaring cryptocurrencies, non-fungible tokens, and any other asset are under ‘Virtual Digital Assets’ which are now subject to gains tax, which is similar to shares in the stock market.
Even as the VDA tax rate is high, investors are happy with the fact that crypto has gained some recognition by finding a mention in the official Budget document for taxation purposes. However, Finance Minister Nirmala Sitharaman has clarified that the imposition of tax on income from VDAs including cryptocurrency doesn’t mean they have been declared legal. While much clarity on the legality of cryptocurrency will come through the upcoming bill to regulate Virtual Digital Assets, a number of cryptocurrency investors are confused about the calculation of their tax liability.
In the Union Budget 2022, it has been proposed to introduce a new Section 115BBH for taxation of persons whose sources of income include income from transfer of VDAs. “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 calculated on the income of transfer of any Virtual Digital Asset at the rate of 30% and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of Virtual Digital Asset,” Budget 2022 Memorandum said.
The finance bill memo explicitly states that no deduction in respect of any expenditure (other than the cost of acquisition of a digital asset) or allowance or set-off of any loss shall be allowed to the assessee under any provision of the Act while computing income from transfer of Virtual Digital Assets. Cryptocurrency investors cannot set off any loss arising from the transfer of Virtual Digital Assets and such loss will not be allowed to be carried forward to subsequent assessment years. Surpluses will be taxed and losses cannot be used to set off against profits. Those who receive cryptocurrency as gifts will have to pay tax too.
