The finance minister Nirmala Sitharaman introduced specific tax regime for virtual digital assets in Union Budget 2022-23. These virtual assets include cryptocurrency and NFTs (non-fungible tokens). Here’s all you need to know.
How much is the tax
Any income from transfer of any virtual digital asset to be taxed at the rate of 30%. The FM said that there has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.
From when will the taxation come into effect
The government will levy 30% tax on gains made from any private digital assets from April 1, 2022. The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1.
Is any kind of deduction allowed
No deduction in respect of any expenditure or allowance to be allowed while computing such income except cost of acquisition. The Budget 2022-23 also proposed a 1% TDS on payments towards virtual currencies beyond Rs 10,000 in a year. “The TDS has been proposed to track the money trail in cryptocurrencies,” FM said.
Will the Digital Rupee also taxed
No, RBI’s Digital Rupee will not come under this taxation rule. All private cryptocurrencies and virtual digital assets other than Digital Rupee will be subject to 30% taxation.
What about regulation of Cryptocurrency
On regulation of cryptocurrencies, Sitharaman said that the government is doing stakeholders’ consultation on regulating the virtual assets.
What are the other important provisions of this 30% tax
The other terms include:
* Loss from transfer of virtual digital asset cannot be set off against any other income.
* To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtual digital asset at the rate of 1% of such consideration above a monetary threshold.
* Gift of virtual digital asset to also be taxed in the hands of the recipient.