The gift of virtual digital assets will be taxed in the hands of the recipient
Chennai: By bringing cryptocurrency under the tax net, the Union Budget 2022 seems to have allayed fears regarding a probable ban. However, it has put the transactions in the highest tax bracket of 30 per cent.
The announcement of finance minister Nirmala Sitharaman that the Reserve Bank of India will be introducing a ’digital rupee’ in 2022-23 will further strengthen the virtual asset market.
The budget proposed to tax any income from transfer of ’virtual digital assets’ at 30 per cent. Further, a one per cent tax deducted at source (TDS) will be levied on transfer of such assets above a certain value. This will help capture transaction details and will a major deterrent to possible use of the assets for money laundering, financing illegal activities, including drug-trafficking and terrorism.
The gift of virtual digital assets will be taxed in the hands of the recipient. There will be no provision for deducting any expenditure or allowance while computing the income from these assets.
The Budget defines "virtual digital asset" as any information or code or number or token generated through cryptographic means or otherwise providing a digital representation of value exchanged.
"The Budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer,” said Ashish Singhal, founder and CEO, CoinSwitch and Co-chair Blockchain and Crypto Assets Council (BACC).
The 30 per cent tax with 1 per cent TDS will be a deterrent to several investors who are jumping into the crypto bandwagon. Cryptos also have seen huge corrections in the recent past and the Budget said that losses incurred from transfer of the assets cannot be set off against any other income.
"This seems to be on the higher spectrum but it is a start and we hope to go only forward from this," said Aishwarya Shivakumar, CEO, Oddz Finance.
The Budget said that RBI will introduce Central Bank Digital Currency (CBDC) or digital rupee using blockchain and other technologies in 2022-23. Digital currency will also lead to a more efficient and cheaper currency management system.
"The announcement on the launch of a digital rupee using blockchain issued by the RBI will familiarise Indians with the benefits and efficiency of virtual currency, building an appetite for the crypto, blockchain and the multitudes of innovations and employment opportunities that these technologies are capable of fostering," said Avinash Shekhar, CEO, ZebPay.