Union Budget 2022 provided much-needed clarity on how digital currencies will be taxed in the country. The cryptocurrency gained an immense popularity in India in the last few year. With over 10 crore cryptocurrency investors, India has one of the biggest market of digital tokens. It has been a longstanding demand of the investors to provide a tax framework for the virtual currency investments. Finance minister Nirmala Sitharaman announced a new tax framework for cryptocurrency investors.
Union Budget 2022 proposed that the transfer of any virtual or cryptocurrency asset will be taxed at 30 per cent. No deduction except cost of acquisition will be allowed and no loss in transaction will be allowed to be carried forward, the finance minister said in Budget 2022.
“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 incometax payable shall be the aggregate of the amount of income-tax calculated on 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," according to Union Budget memorandum.
“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," said Amit Singhania, partner, Shardul Amarchand Mangaldas & Co.
Further, TDS will be imposed on payments for the transfer of crypto assets at a rate of 1 per cent for transactions over a certain threshold. Finance minister also announced that gifts of crypto assets will be taxed in the recipient’s hands. “The introduction of TDS on crypto-transfers will enable the government to better monitor crypto transactions," Singhania explained.
Crypto Tax is a Welcome Move
“The tax clarity is a welcome move. Overall, it’s a huge relief to see that our government is adopting the progressive stance of going ahead in the direction of innovation. By bringing in taxation, the government legitimises the industry to a large extent. The majority of people, especially corporates, who have been sitting on the sidelines because of uncertainties will now be able to participate in crypto. Overall, it’s a positive move for the industry," said Nischal Shetty, founder and CEO, WazirX
“This amendment will take effect from April 1, 2023 and will accordingly apply
in relation to the assessment year 2023-24 and subsequent assessment years," said Union Budget.
“The move to tax virtual digital assets gives the entire ecosystem including investors and exchanges transparency on the road ahead. A 30 per cent tax on income from virtual digital assets, while high, is a positive step as it legitimizes crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs across stakeholders in the country. The government has come a long way in its stance towards crypto from last Feb to today and we are confident that this will herald a new era of growth and innovation for India in a Web 3.0 world," said Avinash Shekhar, CEO, ZebPay.