New Delhi: Union finance minister Nirmala Sitharaman, while presenting the Union Budget 2022, introduced a new Section 115BBH under the Income Tax. This implicited that a flat tax of 30 percent will be applicable on the gains from the sale of virtual digital assets.
These virtual assets will include cryptocurrencies as well as non-fungible tokens (NFTs).
However, the loss that transpired from the sale of any digital assets can not be discharged against any other income.
A TDS of 1 percent will be imposed on the amount paid during the transfer of a virtual asset. Moreover, a tax at the same rates will be levied at the hands of the receiver, in case you gift cryptocurrencies or any other virtual digital asset.
Atharva Sabnis, member of Blockchain and Crypto Assets Council (BACC), explicated the precision of virtual cryptocurrency in a statement saying, “The bill provides for the definition of virtual digital asset, which is broad enough to cover emerging digital assets including NFT, assets in the metaverse, digital currencies, tokens, etc. Basically, any information or code or number or token not being Indian currency or foreign currency is generated through cryptographic means”.
The proposed tax rates on the virtual assets will be applicable from Financial Year 2022-23. From the Assessment Year 2023-24, the income tax return form will have a separate column to declare gains from cryptocurrency.
Income Tax on digital assets till March 31:
The newly proposed tax rates are not applicable in the current financial year, hence any gains from the cryptocurrencies will be taxable as per the existing income tax rules.
Know Cryptocurrency Tax Rules for the forthcoming financial year:
“For transactions before April 1 you will show in some head in your ITR and the Assessing Officer will do an assessment for you. The assessing officer will take a call on what head crypto gains should be charged”, revenue secretary Tarun Bajaj told news agency PTI in a recent interview.
Earlier, experts believed that gain earned from virtual assets can be manifest as durable capital profits and after abstracting the cost it would be taxable at the rate of 20 percent.
However, Bajaj said, “The assessing officer will take a final call on this. Currently trading in the derivative is not considered as investment or capital gain but is treated as business income.”