Crypto Legal Updates
Budget 2022 has come out with a proposal to impose income tax on the income derived from the trading in crypto assets (virtual digital assets). It is also provided by the proposed law that no set-off or carry forward of losses from crypto transactions shall be allowed with the income under other heads of income. However, there was confusion as to whether losses from one crypto-asset could be set off against gains from another crypto asset.
In this regard, a question was raised by a Member of Parliament before the Government as follows:
Set off gains from crypto-asset with loss of another crypto asset:
Losses incurred due to the transfer of virtual digital assets cannot be set off against any other income, whether the losses arising from the sale of virtual digital assets can be set off against the gains arising from another virtual digital asset?
On this issue, the State Minister of Finance answered as follows:
As per the provisions of the proposed section 115BBH to the Income Tax Act, 1961, loss from the transfer of the virtual digital assets is not allowed to be set off against the income arising from the transfer of another virtual digital asset.
Deductions allowed in crypto mining in India:
Whether infrastructure costs incurred in mining cryptocurrencies are to be treated as the cost of acquisition and are therefore permissible deductions?
On this issue, the State Minister of Finance answered as follows:
Finance Bill, 2022 has proposed to insert section 115BBH to the Income Tax Act, 1961 to provide for taxation of income from transfer of virtual digital assets (VDA). As per the proposed section, any income from transfer from VDA shall be taxed at the rate of 30%. Further, while computing the income from the transfer of VDA, no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed. The Bill also proposed 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. As per the proposed provisions of section 115BBH, infrastructure costs incurred in the mining of VDA will not be treated as the cost of acquisition as the same will be in the nature of capital expenditure which is not allowable as a deduction as per the provisions of the Act.
Disclaimer: Investing in crypto is highly risky as crypto assets as highly volatile in nature. The above article is meant only for educational purposes and Taxwink is not responsible for any loss or damage caused to any person from the use of any information contained in the above article.
