What is Virtual Digital Asset?
Finance Bill, 2022 has inserted a new clause 47A to define virtual digital asset. As per the new clause, a virtual digital asset include any information or code or number or token generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value which is exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or unit of account and includes it’s use in any financial transaction or investment, but not limited to investment schemes and can be transferred, stored or traded electronically. Non fungible token and any other token of similar nature are included in the definition.
Taxation on Virtual Digital Asset
Finance bill 2022 provides any gain arising from transfer of virtual digital asset will be taxed @ 30% on the market value of the asset at the time of transfer. Finance bill 2022 has also amended section 56(2) which implies that in case of gift of virtual digital assets with inadequate or without consideration tax will be imposed on the market value at the recipient’s end.
TDS Applicability on transaction of virtual digital asset
Finance bill 2022 has also inserted a section 194S of TDS which will cast the responsibility of TDS on the purchaser at the time of payment. It says if the purchaser is an Indian Nd he pays then he needs to deduct TDS @ 1% and deposit with the government.
The new tax regime will benefit both direct and indirect tax administration as it will help them to exchange information about crypto transactions because operators who are liable to pay income tax or the purchasers or the people who transact in crypto will also be able to pay GST on some of those transaction.
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