VDA Taxation: Current State and Future of Crypto
Heard
the news of taxation on VDA (Virtual Digital Assets)? Well, if not then just to
let you know, the Indian Finance Minister Smt. Nirmala Sitharaman has proposed,
Tax on the transfer of Digital Assets in the recent Budget of 2022-23.
Firstly,
to know anything further, one should be familiar with the concept beforehand. So,
any kind of stuff/article whether a token, any information or documents, generated
by any digital mean; recognized by the advisable entity; then only it could be
referred as a Digital Asset.
The Proposition
by the Finance Minister
It
was proposed that there would be 30% taxation on the income earned by the
transfer of any Digital Asset. And in order to capture the transactions, a TDS
(Tax Deducted at Source)
would be deducted, on the payment made, @ 1% subject to certain conditions. Even
if it’s received as a gift, it would be taxable in the hands of the recipient. There
would be no deduction except the cost of acquisition, also no loss can be set
off and so the carry forward of losses.
To
forge some sense let’s just understand this with an example:
For
instance, if you sold a VDA at Rs. 100,000 which was actually acquired at Rs. 60,000,
the earned profit would be Rs. 40,000 (i.e., 100,000-60,000) and the tax will
be 12,000 (i.e., 40,000*30%), but the ultimate tax liability would be of Rs. 12,480
(inclusive of health and education cess on the initial tax calculation- 12,000*4%=480).
Now
let’s suppose you earn say Rs. 500,000 from any source of income (whether it’s
from Salary or from Income from House Property or Gain on sale of any Asset, or
from any other source), and earn a loss of Rs. 10,000 on the sale of that VDA at
Rs. 50,000 (cost acquired as mentioned above i.e., Rs. 50,000). You can’t set
off that amount of loss from the income earned i.e., 500,000 from any other
source.
The stand and
the future of Crypto
So,
where does in all of this ‘The cryptocurrency’ stands? By the speech given by
the Finance Minister, it can be seen that the inclination was on the digital
assets instead of cryptocurrency or digital currency technically you can say. Initially,
in November 2021, a bill was framed named, The Crypto Currency and Regulation
of Official Currency Bill, 2021. The purpose was to prohibit private currency certainly
with some exceptions, primarily to facilitate a framework for soon to be
launched RBI’s (Reserve Bank of India) own official digital currencies. The
taxation by the Indian government somehow does provide recognition to VDA.
Meanwhile, the announcement made by the RBI to indite its own cryptocurrency surely
provides a boost to the world of virtual currency.
Conclusion
The
Government is planning to bring the taxation as early as possible; the intimation
is to fetch possibly in the upcoming July 2022. As stated above, it’s only the
recognition of VDA, and the cryptocurrency is a different thing from the Digital
Asset. The steps taken by RBI is to initiate the recognized and regulated
cryptocurrency, however, the swap of private cryptocurrency is still a subject
to look at, as there’s no stand taken by the government yet.
- https://www.indiabudget.gov.in/
- https://www.thehindu.com/opinion/op-ed/neither-ban-nor-regulate-crypto/article37992006.ece
- https://www.financialexpress.com/money/income-tax/cryptocurrency-tax-calculation-2022-what-will-be-taxed-what-wont-how-and-when-explained/2423976/
- https://www.theguardian.com/world/2021/nov/24/india-to-ban-private-cryptocurrencies-and-launch-official-digital-currency
- https://www.timesnownews.com/business-economy/union-budget-2022-proposals-to-decrypt-cryptocurrency-taxation-in-the-offing-article-89249460
Really interesting and well explained blog👏👌
ReplyDeleteWell articulated..
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