India’s ministry of finance has clarified in parliament how the government plans to tax cryptocurrency transactions. A proposed new section to the Income Tax Act states that gains from crypto transactions will be taxed at 30% while losses cannot be deducted.
Indian Government Reveals Taxation Plan
The Indian ministry of finance answered some questions Monday in Lok Sabha, the lower house of parliament, regarding how cryptocurrency transactions will be taxed going forward.
Minister Pankaj Chaudhary, the minister of state in the ministry of finance, explained that The Financial Bill 2022 has proposed to insert section 115BBH to the Income Tax Act 1961 to provide for the taxation of income from transfers of virtual digital assets (VDAs). He stated:
As per the proposed section, any income from transfer of VDA shall be taxed at the rate of 30%.
“Further, while computing the income from transfer of VDA, no deduction in respect of any expenditure (other than cost of acquisition) or allowance is allowed,” the minister ded.
Minister Chaudhary continued: “The bill also proposes to define VDA. If any asset falls within the proposed definition, such virtual asset will be considered as VDA for the purposes of the Act and other provisions of the Act will apply accordingly.”
Specifically, Lok Sabha member Karti Chidambaram asked the finance minister “whether infrastructure costs incurred in mining cryptocurrencies are to be treated as cost of acquisition and are therefore permissible deductions.”
Minister Chaudhary explained:
Infrastructure costs incurred in mining of VDA (eg. crypto assets) will not be treated as cost of acquisition as the same will be in the nature of capital expenditure which is not allowed as deduction as per the provisions of the act.
Noting that “while losses incurred due to the transfer of virtual digital assets cannot be set off against any other income,” Chidambaram further asked, “whether the losses arising from the sale of one virtual digital asset can be set off against the gains arising from another virtual digital asset.”
Citing the proposed provisions, the minister of state replied:
Loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA.
The Indian government is also working on the classification of cryptocurrency under the Goods and Services Tax (GST) law in order to levy tax on the entire value of transactions, PTI reported Sunday. The current law does not have a clear classification for cryptocurrency, and 18% GST is only levied on services provided by crypto exchanges categorized as financial services, the publication conveyed.
A GST official was quoted as saying:
There is a clarity needed in regard to levy of GST on cryptocurrencies and whether it has to be levied on the entire value.
Last week, Bitcoin.com News reported that the Indian income tax department is going after 700 cryptocurrency investors for non-payment of taxes.
Meanwhile, the Indian government is working on cryptocurrency legislation. A crypto bill was listed to be considered in the winter session of parliament but it was not taken up. According to reports, the government needs more time to finalize the bill.
What do you think about how India plans to tax cryptocurrency transactions? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting vice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
META ARTICLE: Indian Government Reveals How It Plans to Tax Cryptocurrency Transactions – Taxes Bitcoin News PUBLISHED: 2022-03-22 03:00:47 SOURCE: https://news.bitcoin.com/indian-government-reveals-how-it-plans-to-tax-cryptocurrency-transactions/