Crypto Cess In India: Govt Levies 30% Tax On Proceeds Of Digital Assets

The Government has taken a conservative approach to the taxation of crypto assets by announcing a flat 30% tax rate on income from such assets. 

In her Budget Speech 2022, Finance Minister Nirmala Sitharaman said that 30% tax would be levied on income from the transfer of virtual digital assets. The official said losses will not be allowed as set-offs, and that gifts in virtual digital assets will be taxed in the hands of the receiver. 

So, we have finally arrived at India’s crypto tax regime! 

Sithraman also mentioned the phenomenal increase in transactions in virtual assets, noting that the magnitude and frequency of these transactions make it imperative for a specific tax regime to be established. 

The Finance Minister said, as a result, any income from the transfer of a virtual digital asset will be taxed at a rate of 30 per cent. 

According to Sitharaman, no deduction will be allowed for expenditures or allowances related to such income, except the costs of acquisition. Losses from the transfer of virtual digital assets cannot be offset by other income. 

In addition to this, the Finance Minister proposed to introduce TDS on payments made in connection with the transfer of virtual digital assets at a rate of 1 % on such consideration above a monetary threshold. Gifts of virtual digital assets would also be taxable in the recipient’s hands. 

Moreover, the Finance Minister announced a central bank digital currency (CBDC) will be introduced by 2023 based on Blockchain technology and backed by the RBI. 

In response to the announcement, Sundara Rajan TK, Partner at DVS Advisors LLP, said: “The clarity on the tax of digital assets has been long overdue and had been expected this year.” 

Taxation of digital assets at 30% along with the launch of a new digital currency by the government betrays an intention to discourage such investments and intends only for HNIs to invest and crypto as a currency will be prohibited. 

Cryptocurrency experts and investors awaited clarity on the taxation of gains from crypto assets in Budget 2022. Some analysts believed Finance Minister Nirmala Sitharaman would not address the cryptocurrency issue directly in her Budget speech. 

The Finance Minister is expected to make some announcements regarding crypto tax. 

As per Sanjeev Sanyal, the Government is expected to take a balanced view on cryptocurrencies. Meanwhile, the Economic Survey 2022 tabled in the Parliament on Monday (January 31, 2021) did not discuss cryptocurrency or Blockchain technology. 

The Cryptocurrency Regulation Bill is unlikely to be introduced to Parliament during the current Budget Session.  

This is a matter currently being discussed within the government, in the Ministry of Finance, and even in Parliament. “Obviously a balanced view will be taken on this as there are some issues of financial stability as well as innovations,” Sanyal was quoted as saying by PTI. 

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