Crypto Tax: Budget 2022 plans to introduce a special tax on virtual assets including crypto currencies and NFTs. What it means for crypto currency investors and when it will be applicable, know details
Finance minister Normal Cithara in Union Budget 2022 announced that India will levy a steep tax at a flat rate of 30 percent on virtual assets including crypto currency and Non-fungible tokens or NFTs. Budget 2022 also proposed the provision of tax deducted at source at 1 percent levied on payments made of transfer of virtual assets. The crypto currency exchanges and traders welcomed the much-awaited policy framework for digital tokens. In the article, we will talk about the proposed crypto currency tax in detail, take a look
Budget 2022 Introduced a New Crypto Tax
Budget 2022 proposed to introduce a new section 115BBH to levy income tax on crypto currencies and other virtual assets. “Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 percent,” the finance minister said while presenting the Budget 2022.
“The proposed section 115BBH seeks to provide that where the total income of an assessed 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 the income of transfer of any virtual digital asset at the rate of 30 percent and the amount of income-tax with which the assessed would have been chargeable had the total income of the assessed been reduced by the aggregate of the income from transfer of a virtual digital asset,” Budget 2022 Memorandum said.
Crypto Tax Decoded
1) The income from the sale of virtual assets such as crypto currencies, NFTs will be taxed at a flat rate of 30 percent
2) There will be no deduction for any expenses incurred on crypto currency transactions, other than the cost of acquiring such assets.
3) Loss incurred from crypto currency or virtual assets cannot be set off against any other income (shares or mutual funds) of the taxpayer.
4) Loss arising from the digital assets cannot be carried forward to the next year.
5) Additionally, any payment of proceeds to a taxpayer from the sale of digital assets will attract a 1 percent TDS on transactions above Rs 50,000 in a year.
6) Gifting crypto currencies and NFTs will also be taxable for the recipient.
Example: If you have sold virtual digital assets worth Rs 1 lakh and the cost of acquisition is Rs 20,000. The net income from the sale of the virtual assets will Rs 80,000. (Rs 1,00,000-Rs 20,000). According to the new income tax law, there will be a tax liability of Rs 24,000. It must be mentioned that loss of virtual assets can be settled against loss of virtual assets.
