Finance Minister Nirmala Sitharaman announced during her Budget speech that moving forward cryptocurrencies will fall under a tax net, highlighting a 30 percent tax on any income from the transfer of virtual digital assets. She also pointed out that no deductions and exemptions will be allowed on the same.
Gifts that are in the form digital assets in virtual form are tax-deductible on the person who receives them. There will be an additional tax of 1 percent that is deducted at the source (TDS) on payment made to facilitate the transfer of assets digitally.
“There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions are made it imperative to provide for a specified tax regime 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,” said Niramala Sitharaman while presenting the Union Budget 2022-23.
“No deduction in respect of any expenditure or elements shall be allowed while computing such income except the cost of acquisition for loss from the transfer of virtual digital assets cannot be set off against any other income,” she added.
The finance minister was unable to clarify what this means in relation to cryptocurrency exchanges and GST However, the announcement could be viewed as a setback for prospective investors seeking to diversify their financial portfolios.
“In order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer virtual digital assets at a rate of one percent of such considerations about a monetary threshold gift the virtual digital asset is also proposed to be taxed in the hands of the recipient,” the finance minister added.
The Reserve Bank of India will also be introducing digital currency in the next fiscal year, she explained. The central bank of India has been testing the use of its Central Bank Digital Currency (CBDC) for a number of months.
“Introduction of central bank digital currency can give a significant increase to digital economy. Digital currency can be a great way to create an efficient and less expensive system of managing currency,” Sitharaman said.
Cryptocurrency is a digital currency, and is not an official currency and is susceptible to market risk. The information in this piece isn’t intended to constitute and is not a form of the provision of financial advice, trading advice as well as any kind of advice or suggestion that is offered or approved by NDTV.