Cryptocurrency tax: Budget 2022 unveils norms for virtual digital assets

What is the News?

In Budget 2022, the Finance Minister has announced several norms for virtual digital assets.

What are the steps announced by the Finance Minister for crypto assets?

Digital Rupee: Reserve Bank of India will launch a Digital Rupee – India’s version of a Central Bank Digital Currency (CBDC) by 2022-23. The CBDC will be backed by blockchain technology.

Definition of Crypto Assets: The Finance Bill, 2022 has for the first time provided a definition for crypto assets. According to the definition, any information or code or number or token generated through cryptographic means or otherwise providing a digital representation of value exchanged with or without consideration that can be transferred, stored, or traded electronically can be defined as “virtual digital assets”.

Essentially, the Finance Bill has provided for a definition of virtual digital assets which is wide enough to cover emerging digital assets, including non-fungible tokens (NFTs), assets in the metaverse, digital currencies and tokens, among others.

Tax on Crypto Assets: The Finance Minister has proposed that transfer of any virtual/ cryptocurrency asset will be taxed at 30%. No deduction except the cost of acquisition will be allowed, and no loss in transaction will be allowed to be carried forward.

In order to monitor the money trail in crypto deals, a 1% Tax deduction at Source(TDS) will be imposed on every transaction using cryptocurrencies.

Further, ​​gifts in virtual digital assets would be taxed in the hands of the recipient.

Source: This post is based on the following articles:

– “Cryptocurrency tax: Budget 2022 unveils norms for virtual digital assets” published in Business Standard on 2nd Feb 2022.

– “Budget 2022 Explained: How will tax on crypto work” published in Indian Express on 2nd Feb 2022.

– “​​RBI TO ISSUE DIGITAL RUPEE STARTING FROM 2022-23” published in PIB on 2nd Feb 2022.

– “How the newly introduced tax on crypto would work” published in Livemint on 2nd Feb 2022.