Taxation of virtual digital assets- Union Budget 2022
Hello readers, Today I will discuss taxation of virtual digital asset in simplified manner-
As we know new scheme of taxation has been introduced for virtual digital asset in the Finance Bill.
What is virtual Digital Asset?
‘’Virtual Digital Asset’’ means any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically’’
Section 115BBH: seeks to provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the incometax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30% and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset.
In other words, Income from transfer of virtual digital asset will be taxable at rate of 30% flat..
Now Next question under which head above income will be taxable –
Obviously Income from transfer of virtual digital asset wiil be taxable under the head- ‘’Income from other sources’’.
- Further no deduction in respect of any expenditure (other than cost of acquisition) or allowance or set off of any loss shall be allowed to the assessee under any provision of the Act while computing income from transfer of such asset.
- Also, no set off any loss shall be allowed from Income of transfer of virtual digital asset.
- In case of loss on transfer of digital asset not allowed to be set off against any other income computed under any other provisions of Act. Such loss shall not be allowed to be carried forward to subsequent assessment years.
- Amendment will take effect from A.Y 2023-24 –
- Section 194S- provide for deduction of tax on payment for transfer of virtual digital asset to a resident at the rate of one per cent of such sum.
- However, in case the payment for such transfer is–
(i) wholly in kind or in exchange of another virtual digital asset where there is no part in cash; or
(ii) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer, the person before making the payment shall ensure that the tax has been paid in respect of such consideration.
- Exemption from Section 194S-
- In case of specified person- No tax is required to be deducted in case payer is specified person and amount of consideration is less than Rs 50000 during the financial year
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- In any other case, said limit is proposed to be Rs 10000 during the financial year.
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- Who is specified person-
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- Means a person- being an individual or Hindu undivided family whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him
I. does not exceed one crore rupees in case of business or fifty lakh rupees
II. in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
III. being an individual or Hindu undivided family having income under any head other than the head ‘Profits and gains of business or profession’.
- Amendment in Section 56(2)(x) to iner-alia provide that the expression “property” shall have the meaning assigned to it in Explanation to clause (vii) and shall include virtual digital asset. It means if virtual digital Asset transferred to person who is not relative and amount of consideration exceeds Rs 50000 then it will be taxable in hands of recipient.
That’s all for today- Queries related to above mailed at [email protected]
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