The cryocurrency tax and proposed regulation bill have been a topic of discussion among investors and stakeholders in India for sometime. While Finance Minister Nirmala Sitharaman did provide clarity on crypto taxation, the government is yet to bring legislation to regulate cryptocurrencies.
The government on Thursday proposed to tighten the norms for taxation of cryptocurrencies by disallowing the set off of any losses with gains from other virtual digital assets, according to a PTI report.
FINANCE BILL, 2022
As per the amendments to the Finance Bill, 2022, circulated among the Lok Sabha members, the ministry proposes to remove the word ‘other’ from the section relating to the set off of losses from gains in virtual digital assets, the PTI report says.
This would mean that loss from the transfer of virtual digital assets (VDA) will not be allowed to be set off against the income arising from the transfer of another VDA.
VIRTUAL DIGITAL ASSETS
The VDAs will include prevailing cryptocurrencies and non-fungible tokens (NFTs) which has gained a fad over the past couple of years.
According to the Finance Bill, 2022, a VDA could be a code or number or token which can be transferred, stored or traded electronically, PTI reported.
CRYPTO TAX, TDS, DEDUCTION
- The Union Budget 2022 has brought in clarity concerning the levy of income tax on crypto assets.
- From April 1, a 30 per cent I-T plus cess and surcharges, will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions.
- Also, while computing the income from transfer of VDA, no deduction in respect of any expenditure (other than the cost of acquisition) or allowance will be allowed.
- The Budget 2022-23 also proposed a 1 per cent Tax Deducted at Source (TDS) on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient.
- The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.
- The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1.
CRYPTOCURRENCY BILL IN INDIA
Separately, the government is working on legislation to regulate cryptocurrencies, but no draft has yet been released publicly, as per the PTI report.
The bill was was listed in the government’s legislative business of the winter session last year. The bill seeks to “create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India.”
The bill “allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses”, according to the bill listed for introduction on the Lok Sabha website.
However, the bill was not brought in during the winter session of Parliament.