The finance minister announced that virtual digital assets including cryptocurrencies will be taxed at a rate of 30% from 1st April 2022. Here are the details.
The finance bill 2022 defines a virtual digital asset as follows:
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;
The definition also includes non-fungible tokens.
Crypto taxation rules:
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- A flat rate of 30% will be levied on the income from virtual digital assets regardless of the tax slab
- Indexation of the gains is not allowed.
- losses or gains arising from digital virtual assets cannot be set off with any other gains
- losses cannot be carried forward
- Digital virtual assets will be designated as property for the purposes of gifting and will be taxable at the same rate in the hand of the recipient. No recipient will be excluded from taxation.
- In order to tax crypto transactions, a 1% TDS will be levied. Our understanding is that this 1% is within the overall 30% tax. The monetary threshold above which the TDS is applicable will be intimated later.
We recommend crypto investors rethink their strategy between now and March 31st 2022. They need to ask, is the risk premium after-tax worth their time and effort?
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