New Tax Rules for Crypto Assets
Recently the government has clarified its stand on crypto tax provisions. In this regard, the Ministry of Finance has clarified that the loss arising from transfer of Virtual Digital Asset (VDA) will not be allowed to be set-off (adjusted) with the income or profit from other VDAs.
- In other words, any loss arising out of VDA cannot be set-off with profit. Virtual Digital Assets (VDAS) shall mean inter-codes or numbers or tokens or information generated through cryptographic means or any other means. Such assets may be transferred, stored or traded electronically.
- In addition, virtual digital assets also include non-fungible tokens (NFTS) or other similar tokens.
- The Finance Ministry also stated that the cost of mining will not be considered as acquisition cost in case of VDAS.
- Mining is literally a process of generating crypto tokens.
- The government is working on classifying cryptocurrencies as goods or services under the GST law. This will enable tax to be levied on the entire value of the transaction.
- Currently, 18 per cent GST is levied only on services provided by crypto exchanges. These services are classified as financial services.
- It is worth noting that in the budget of 2022-23, it was announced to bring cryptocurrencies within the tax net (i.e. tax net).
The following announcements were made in this budget:
- Any income from virtual digital assets (including cryptocurrencies) will be taxed at the rate of 30%.
- Transactions exceeding a limit during the transfer of virtual digital assets will attract 1% TDS.
Encryption technology is used to generate these. This technology is used to regulate the generation of cryptocurrency units and the transfer of funds.
No central bank has any control over cryptocurrencies.
Each cryptocurrency is controlled through a distributed ledger technology called blockchain. Blockchain is a shared and immutable ledger. It provides the facility to record all the transactions and track the assets in a business network.
Source – The Hindu