India’s finance minister Nirmala Sitaraman revealed how the government intends to tax bitcoin transactions in parliament. On Monday, Nirmala Sitaraman responded to queries about how cryptocurrency transactions will be taxed in the future in the Lok Sabha, the lower house of parliament.
The Financial Bill 2022 proposes to amend section 115BBH to the Income Tax Act 1961 to provide for the taxation of income from transfers of virtual digital assets, according to Minister Pankaj Chaudhary, the minister of state for finance (VDAs). He explained:
According to the proposed clause, any revenue derived from the transfer of VDA will be taxed at a rate of 30%.
“Furthermore, no deduction in respect of any expenditure (other than the cost of purchase) or allowance is permitted when determining the revenue from the transfer of VDA,” the minister stated.
“The law also attempts to define VDA,” Minister Chaudhary stated. If any virtual asset meets the proposed definition, it will be treated as a VDA for the purposes of the Act, and the Act’s other provisions will apply accordingly.”
Karti Chidambaram, a member of the Lok Sabha, specifically questioned the finance minister “if infrastructure expenditures paid in mining cryptocurrencies are to be recognized as cost of acquisition and hence allowable deductions?”
Minister Chaudhary said, “Infrastructure expenditures paid in mining VDA (e.g. crypto assets) will not be considered the cost of acquisition since they will be capital expenditure, which is not allowable as a deduction under the act’s requirements.”
Chidambaram went on to say that “although losses incurred due to the transfer of virtual digital assets cannot be set off against any other income,” he also wondered if “losses resulting from the sale of one virtual digital asset might be set off against profits emerging from another virtual digital asset.”
The minister of state responded, citing the proposed provisions: Losses incurred due to the transfer of a VDA will not be allowed to be offset against revenue derived from the transfer of another VDA.
According to PTI, the Indian government is also working on classifying cryptocurrencies under the Goods and Services Tax (GST) law so that they may be taxed on the total value of transactions. According to the journal, the existing law does not have a clear definition for cryptocurrency, and 18 per cent of GST is only imposed on services offered by crypto exchanges classified as financial services.
There is a need for clarification on the application of GST to cryptocurrencies and if it must be applied to the total value.
For non-payment of taxes, the Indian income tax authorities are pursuing 700 bitcoin investors.
In the meanwhile, India’s government is drafting cryptocurrency laws. A crypto law was scheduled to be debated during parliament’s winter session. However, it was not taken up. The administration, according to reports, requires additional time to complete the law.
