Budget 2022: Bold move, may upset crypto transactions: Experts on virtual assets tax

Despite the government not introducing the much-awaited cryptocurrency bill in the Union Budget 2022-23, the union finance minister, Nirmala Sitharaman announced that any income from transfer of virtual digital assets will be taxed at 30 per cent. ”Tax Deducted at the source for payments of virtual assets will be at 1 per cent. Gifting of virtual assets also to be taxed,” the finance minister said.

Besides this, the finance minister also announced the introduction of central bank digital currency, or popularly known as CBDCs, powered by blockchain technology in 2022-23. The digital currency will be introduced by the Reserve Bank of India.

Experts have described it as a bold move which could possibly discourage transactions. However, cryptocurrency exchange WazirX’s CEO, Nischal Shetty said that this announcement brings further clarity on crypto transactions.

He added that the crypto ecosystem will hopefully move away from fear of banning of cryptocurrencies to taxation of virtual assets.

Hope to see a reduction of crypto ban fear in India

India just taxed crypto 💪

Lot to unpack here but overall this is a very positive step forward for crypto ecosystem in India 🇮🇳#IndiaWantsCrypto

— Nischal (WazirX) ⚡️ (@NischalShetty) February 1, 2022

“Clarity on crypto tax as well! Income from transfer of any digital asset to be taxed at 30 per cent. No expenditure deduction except cost of acquisition. Loss from digital asset cannot be setoff. Yet another step towards positive crypto regulations,” he said in a tweet.

Clarity on crypto tax as well!

Income from transfer of any digital asset to be taxed at 30%

No expenditure deduction except cost of acquisition

Loss from digital asset cannot be setoff

Yet another step towards positive crypto regulations 🚀🚀🚀#IndiaWantsCrypto

— Nischal (WazirX) ⚡️ (@NischalShetty) February 1, 2022

 
“Including a specific tax regime for virtual digital asset (such as crypto) while provides clarity is not in lines with what the industry was expecting. The 30 per cent rate of tax and restriction to set-off losses is a very bold move in discouraging transactions in crypto.” Ritesh Kumar, Partner, IndusLAw, told Business Today.
 
Tapati Ghose, partner at Deloitte India, also agreed that introduction of CBDCs and rules of taxation for digital assets does provide some clarity on the status of cryptocurrencies in India.

“Introduction of central digital currency using blockchain to be issued by RBI in 22-23. It is expected that the tax regulation of such currency is also made clear, as there are aspects of classification (capital asset or otherwise), rate of taxation, disclosure requirements that have to be addressed,” she said.
 
“Income from virtual digital asset to be taxed at 30%. No deduction other than cost of acquisition will be allowed. Transaction details to be captured by way of TDS on sale. Gift of VDA to be taxed in the hands of the recipient.,” Ghose added