The Central government, in the union budget 2022-23, announced a flat 30% tax on income from digital assets or crypto.
Union finance minister Nirmala Sitharaman has said that any income from transfer of any virtual digital asset (VDA) shall be taxed and no deductions or exemptions will be allowed.
Also, gifts in virtual digital assets would be taxed in the hands of the recipient.
No negative impact on prices of most of the popular cryptocurrency tokens was noticed following the announcement of the tax regime.
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Meanwhile, the cryptocurrency community in India have expressed happiness over the fact that crypto has gained some recognition, even though the VDA tax rate is high.
Budget 2022 has 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 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.
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When the tax regime will come into effect?
According to the Budget document, 30% tax on cryptocurrency and other VDAs would be applicable from Assessment Year 2023-24.
Any income from cryptocurrency transactions in FY 2022-23 will be taxed at the rate of 30%.
What will be taxed?
Losses arising from transfer of crypto assets cannot be set off against any other income and also it cannot be carried forward.
The effective tax to be paid on income from transfer of cryptocurrencies, NFTs or other virtual digital assets may be more than 30% as this flat rate is exclusive of applicable surcharge and cess.
Not just crypto investors, those who have received airdropped crypto tokens or NFTs as gifts will have to pay tax too.
Tax will be levied only when a person earns an income from transaction, transfer or exchange or crypto or other virtual digital assets.
No tax is to be paid for holding crypto, according to experts.