Home » India Impose 30% Tax on Proceeds of Digitals Assets

Union Finance Minister Nirmala Sitharaman Tuesday proposed to tax “any income from transfer of any virtual digital asset” at a rate of 30 per cent and impose a 1 per cent tax deduction at source(TDS) of transactions above a monetary threshold.
While the upside is limited from a revenue mobilisation perspective, the step is important as it is the first formal recognition by the Government of increasingly popular financial instruments, such as cryptocurrencies, and applications, such as non-fungible tokens.
The imposition of a tax on these instruments is also an indication from the Government on implementing its stated plan of recognising them as assets and not currencies ahead of greater policy clarity that is expected by way of the proposed cryptocurrency Bill.

The imposition of TDS suggests a policy resolve to track the monetary trail in a sector that has so far been outside the purview of regulatory supervision or tax administration.
“Virtual digital assets have gained tremendous popularity in recent times and the volumes of trading in such digital assets has increased substantially.
Further, a market is emerging where payment for the transfer of a virtual digital asset can be made through another such asset.
Accordingly, a new scheme to provide for taxation of such virtual digital assets has been proposed in the Bill,” the explanatory memorandum of the Finance Bill notes.
It also specifically defines “virtual digital asset”, and includes non-fungible token in its ambit.

Further, all forms of crypto or virtual assets cannot be placed under the umbrella term of currency as any form of fiat can only be issued by the authorities concerned.
If authorities issue something, even if it is digital, only then can it be currency. What happens in the world of crypto otherwise is that they are creating very many types of assets using the digital and distributed ledger technology.
All of them are not necessarily currencies
The Government has therefore proposed that the Reserve Bank of India would issue a digital currency in the upcoming financial year, she said, adding that it would be “riveted in or based on” certain value of gold, money, government assets or “something similar”. So it will be asset backed.
It will be sovereign backed in a way. So that is what is currency.
The rest of them, we do not yet know how we are going to regulate them because the consultation is going on.
However, because there is a lot of buying, selling, and transacting, resulting in some kind of a profit, and it is a sovereign right to tax such transactions and profit making.

Apart from the flat 30 per cent tax rate on any income from transfer of any virtual digital asset, government have in the Budget also proposed a 1 per cent TDS of such consideration above a monetary threshold.
Further, recipients of virtual digital assets as gifts will also have to pay a tax.
No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition.
Further, loss from transfer of virtual digital assets cannot be set off against any other income.

The cryptocurrency industry in India,has revised the self regulation norms.

The cryptocurrency industry which has been working on revising self-regulation rules, will include non-fungible token (NFT) start-ups under the purview.
The ongoing work on code of conduct guidelines is also expected to expand on bringing uniform consumer protection safeguards, taxation and advertising rules.
The existing ‘Code of Conduct’ guidelines for the cryptocurrency industry, drafted by The Blockchain and Crypto Assets Council ( BACC), is being revised to take into account concerns around the lack of proper regulatory oversight on crypto transactions.