All About Cryptocurrency Taxation Introduced in Budget 2022
A new section 2(47A) is proposed to be inserted by Finance Bill’2022, which defines virtual digital assets to mean any information or code or number or token (not being Indian currency or any foreign currency) generated through cryptography which provides a digital representation of value exchanged with or without consideration. Non-fungible tokens (NFTs) are included as well, in addition to cryptocurrencies.
These regulations are expected to go into effect on April 1, 2022.
Tax on gifting VDAs/cryptocurrencies/non-fungible tokens
The gifting of cryptocurrencies shall also be taxable in the hands of the recipient. In Section 56(2)(x), the expression “property” shall include virtual digital asset. This shall prevent tax leakages through gifting transactions.
Tax rate (Section 115 BBH)
Section 115BBH is proposed to introduced which would levy a 30% tax on any gains derived from the transfer of any virtual digital asset, plus any appropriate surcharge and cess.
No deductions and set-off available of VDA losses with any other income
Any expenditure (other than the cost of purchase) or set-off of any loss while computing income in the event of a transfer of such asset would be disallowed. Carry forward of such losses is not allowed as well.
Withholding tax provisions (TDS) (Section 194S)
TDS on : Transfer of VDA
TDS Rate: 1%
Consideration Limit: Rs 50,000/- for Specified Person
Rs 10,000/- for other than Specified Person
Refer PDF attached for Defination of Specified Person
Applicable From : 1st July 2022
Note : If TDS deducted u/s 194S than no TDS/TCS shall be applicable under any other provisions.