India’s ministry of finance has clarified in parliament how the government plans to tax cryptocurrency transactions. The Income Tax Act will now include a new section that would tax gains made from cryptocurrency transactions at 30% and not losses.
Indian Government Announces Taxation Policy
Monday was Lok Sabha (the lower house of Parliament) and the Indian ministry of finances answered some questions about how tax will be collected for cryptocurrency transactions.
Pankaj Chaudhary is the minister of finance and the minister of state. He explained that the Financial Bill 2022 proposes to add section 115BBH into the Income Tax Act 1961 in order to tax income from virtual assets transfers (VDAs) to tax. He explained:
According to the section proposed, income from VDA transfer shall be taxed at 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 added.
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 the following:
Mining of VDAs (e.g. Crypto assets will not be considered cost of acquisition because they are capital expenditures that cannot be deducted under 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.”
Referring to the provisions proposed, the minister replied:
The income from transfer of VDAs will not be able to offset losses from VDA transfers.
PTI reported that India is currently working with the Goods and Services Tax law to include cryptocurrency in its Goods and Services Tax. This will allow the government to tax the total value of all transactions. The law currently does not provide a clear definition for cryptocurrency. 18% GST is levied only on the services of crypto-exchanges that have been classified as financial services.
According to a GST official, the following statement was made:
Clearer understanding is needed about the levy and scope of GST for cryptocurrencies.
Bitcoin.com News last week reported that 700 crypto investors were being pursued by the Indian Income Tax Department for not paying taxes.
In the meantime, India is working to create cryptocurrency legislation. The winter session of Parliament was supposed to consider a cryptocurrency bill, but it wasn’t taken up. Reports indicate that the government requires more time in order to complete the bill.
Let us know your thoughts on India’s plans for taxing cryptocurrency transactions. Comment below to let us know your thoughts.
Images CreditsShutterstock. Pixabay. Wiki Commons
DisclaimerThis information is provided for educational purposes only. It does not constitute an offer, solicitation, or recommendation of any company, products or services. Bitcoin.com is not a provider of investment, tax, legal or accounting advice. The author and the company are not responsible for any loss or damage caused or alleged caused by the content or use of any goods, services, or information mentioned in the article.