Electronic tax

India Crypto Tax Rules From April 1st How Will Cryptocurrency Assets Be Taxed?

Cryptocurrency investors in India will have to pay tax under the new virtual digital asset tax scheme from April 1. The Union Budget 2022-23 clarified the collection of income tax on crypto assets.

Finance Minister Nirmala Sitharaman announced in the Union Budget 2022 that “any income derived from the transfer of any virtual digital asset will be taxed at the rate of 30%”.

CRYPTO TAX RULES

  • FM Sitharaman said the scheme would not allow any deduction for any expense or allowance when calculating such income, except for the cost of acquisition.
  • Also, she said, the loss resulting from the transfer of a virtual digital asset cannot be compensated by any other income.
  • The minister also added that in order to capture the details of the transaction, the government would also make a provision for a withholding tax (TDS) on the payment made in relation to the transfer of virtual digital assets at the rate of 1% of these counterparties above a monetary threshold.
  • It is also proposed that the gift of a virtual digital asset be taxed in the hands of the recipient, she said.

YOUR CRYTPO ASSETS WILL BE TAXED

– From April 1, a 30% tax, plus tax and surcharges, will be levied in the same way it treats winnings from horse racing or other speculative transactions.

– One percent TDS on payments to virtual currencies in excess of Rs 10,000 per year and the taxation of such gifts in the hands of the recipient.

– Threshold limit for TDS would be Rs 50,000 per annum for specified persons, which includes individuals/HUFs who are required to have their accounts audited under the Information Technology Act.

– The 1% TDS provisions will come into effect on July 1, 2022, while winnings will be taxed from April 1.

CRYPTOCURRENCY TAXATION

  • Last week, the government proposed to tighten cryptocurrency taxation standards by prohibiting the offsetting of any losses with gains from other virtual digital assets.
  • In line with amendments to the Finance Bill 2022, circulated among Lok Sabha members, the Ministry proposes to remove the word “other” from the section relating to compensation for losses on gains in virtual digital assets.
  • This would mean that the loss resulting from the transfer of virtual digital assets (VDAs) cannot be compensated by the income resulting from the transfer of another VDA.
  • According to the 2022 Finance Bill, a VDA could be a code, number or token that can be transferred, stored or exchanged electronically.
  • VDAs will include mainstream cryptocurrencies and non-fungible tokens (NFTs) that have grown in popularity over the past two years.

DEDUCTION

Infrastructure costs incurred in mining cryptocurrencies or any virtual digital assets will not be allowed as a deduction under the Income Tax Act, Minister of State for Finance says Pankaj Chaudhary.

In a written response to the Lok Sabha, Chaudhary said the government would come up with a definition of virtual digital assets (VDAs) with a view to levying a 30% tax on income derived from the transfer of such assets.

In addition, the loss resulting from the transfer of one VDA will not be able to be offset against the income resulting from the transfer of another VDA, Chaudhary said.

The Minister stated that when calculating VDA’s transfer income, no deduction in respect of any expense (other than the cost of acquisition) or allowance is permitted.

“The (Money) Bill also proposes to define VDA. If an asset falls under the proposed definition, that virtual asset will be considered a VDA for the purposes of the law and other provisions of the law will apply as appropriate. consequence,” he said.

Additionally, he said, “Infrastructure costs incurred in VDA mining (e.g. crypto assets) will not be treated as acquisition costs as they will be of the same nature as capital expenditure”, which is not eligible as a deduction under the IT Act.

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