Union Budget 2022 has proposed that the gains from the sale of virtual digital assets will attract a flat 30 per cent tax going forward. The virtual digital currency will include cryptocurrencies and non-fungible tokens (NFTs). While presenting the Budget, Union finance minister Nirmala Sitharaman announced to introduce a new Section 115BBH under the Income Tax to tax cryptocurrencies in India.
It must be mentioned that the loss arising from the sale of any virtual assets cannot be set off against any other income. A TDS of 1 per cent will be levied on payments made on transfer of the digital assets. If you gift cryptocurrencies or any other virtual digital asset, it will be taxed at the same rate at the hands of the recipient.
Clarifying the definition of virtual cryptocurrency, Atharva Sabnis, member of Blockchain and Crypto Assets Council (BACC) said, “The bill provides for the definition of virtual digital asset, which is broad enough to cover emerging digital assets including NFT, assets in metaverse, digital currencies, tokens, etc. Basically, any information or code or number or token not being Indian currency or foreign currency is generated through cryptographic means.”
According to the Budget proposal, the new tax framework on the cryptocurrency will be applicable from Assessment Year 2023-24. This means the income from cryptocurrency will be taxed at 30 per cent from Financial Year 2022-23.
From next year, the income tax return form will have a separate column to declare gains from cryptocurrency, revenue secretary earlier mentioned.
Income Tax on Cryptocurrency till March 31, 2022
The newly proposed cryptocurrency tax will not be levied from the current financial year ending on March 31. So, if the investors gain any profit from selling cryptocurrencies till March-end, the income will be taxable according to the existing income tax rules.
Know Cryptocurrency Tax Rules for FY22
“Tax has always been applicable to gains on virtual digital currencies, but the ecosystem did not have clarity on it,” said Avinash Shekhar, chief executive officer, ZebPay.
For income from cryptocurrency till April 1, the investors have to show it under some head in the income tax return form and the assessing officer would do the assessment.
“For transactions before April 1 you will show in some head in your ITR and the Assessing Officer will do an assessment for you. The assessing officer will take a call on what head crypto gains should be charged,” revenue secretary Tarun Bajaj told in a recent interview to PTI.
Experts believed that the profit from the cryptocurrencies and other virtual assets can be shown as long-term capital gains and it would be taxed at a rate of 20 per cent after deducting the cost. However Bajaj said that assessing officer will take a final call on this. Currently trading in the derivative is not considered as investment or capital gain but is treated as business income, Bajaj said, according to PTI.
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