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Crypto Currency Or Virtual Digital AssetsTaxation

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Crypto Currency Or Virtual Digital AssetsTaxation

TAXATION OF VIRTUAL DIGITAL ASSETS (VDA)

Virtual Digital Asset for the purpose of deduction of tax under this section means

  • Any information, code, number or token which is generated through cryptographic means, also known as crypto currency. Eg. Bitcoin, ethereum etc.
  • A Non-Fungible Token (NFT) or any other token of similar nature as notified by Govt.
  • Any other digital asset, as notified by the Central Govt.

Following shall not be treated as VDA

  1. Gift Card or Vouchers, being a record that may be used to obtain goods or services or a discount or goods or services.
  2. Mileage points, reward points, or loyalty card etc.
  3. Subscriptions to websites or platforms or applications.

Taxability of Virtual Digital Asset under section 115BBH

Section 115BBH is proposed in finance Bill,2022. income from transfer of any virtual digital asset shall be taxable at the rate of thirty percent.

  1. No deduction in respect of any expenditure except cost of acquisition shall be allowed while calculating tax under section 115BBH
  2. No indexation would be allowed if in case virtual digital asset is held by assessee more than thirty six month.
  3. No set off of any loss from transfer of the digital virtual asset shall be allowed against income computed under any other provision of the act.
  4. No loss on account of digital virtual asset shall be carried forward to succeeding assessment years
  5. Even if the total income including income from transfer of VDA is less than the basic exemption limit tax rate would be 31.2% including Health and Education cess.
  6. As Section 115BBH does not prohibit such rebate, So Rebate u/s 87A would be allowed.

Tax deduction at source under section 194S

Finance Act 2022 inserted a new section 194S in the Income-tax Act, 1961 The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1% of such sum as income tax thereon.

The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier.

Frequently Asked Questions

Tax is to be deducted at the rate of 1% of the consideration. If the payee does not furnish his/her PAN, tax has to be deducted at 20%

No tax needs to be deducted if the consideration payable by a specified person does not exceed Rs. 50,000 during the financial year. No tax needs to be deducted if the consideration payable by any person other than a specified person does not exceed Rs. 10,000 during the financial year.

a) Individual /HUF whose sales , gross receipts or
turnover from business or profession doesn’t exceed 1cr in case of business or 50L in case of profession
during financial year immediately preceding financial year in which the asset is formed

b) Individual /HUF not having any Profits and gains of business or profession (PGBP) income.

Income of Rs.41,000/- (62,000-21,000) from transfer of VDA would be taxable @30% (plus cess of 4%). even if the total income including income from transfer of VDA is less than the basic exemption limit. The Tax would be 12,792/-

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