The Indian Finance Bill 2022, introduced section 115BBH in the Lok Sabha on 01 February 2022, has proposed a specific tax regime for the taxation of virtual digital assets.
The proposed measure ensures tax certainty to the investors and will be effective from Assessment Year 2023-2024. The proposed measure does not treat income as capital gains but taxable income at a fixed rate.
The key highlight of this section is given below:
The income from the transfer of any virtual asset will be taxable at the rate of 30%
The deduction for only the cost of acquiring such assets will be allowed, and no other deduction in the form of expenditure or allowance will be allowed
The loss arising from the transfer of virtual digital assets cannot be set off against any other income
The payment to the seller will also attract tax at the source at the rate of 1% (this TDS is on the entire consideration and not only the gains)
The gift of a virtual asset will be taxed as the recipient's income
It is however unclear whether income earned from the transfer of virtual currency for a period before Assessment Year 2023-2024 will be taxed in the same manner or whether such income can be considered as a capital asset.
While Crypto was finally acknowledged in the budget, it does not mean it is legal, yet. That will be decided upon introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
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