Finance Minister Nirmala Sitharaman on Tuesday announced that all income from transfer of virtual digital assets will be taxed at 30 per cent.
During her Budget speech, Sitharaman said that there has been a tremendous increase in the use of virtual digital assets and it requires a specific tax regime.
The income from virtual digital assets will be taxed at 30 per cent and no deduction will be allowed, the finance minister said.
"No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income," she said.
Further, in order to capture the transaction details, Sitharaman also proposed to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.
Besides, gift of virtual digital asset will be taxed in the hands of the recipient.
The government has defined virtual digital asset as any information or code or number or token, not being Indian currency or foreign currency, generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically.
Besides, a non-fungible token or any other token of similar nature, by whatever name called, will also be classified as a virtual digital asset.
Reacting to the development, Sundara Rajan TK, Partner at DVS Advisors LLP, said, "The clarity on tax of digital assets is long over due and was expected to be provided this year. The announcement of tax at 30 per cent on digital asset, coupled with the government launching its own digital currency, is an indication that the government intends to discourage the same and would intend that only the HNIs make such investments and that the government shall not permit cryptos as currency."
Also Read: Catch the live coverage of Union Budget here
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today