Cryptocurrency: What the Income Tax Rules Say
The use of cryptocurrency has increased in recent times. Along with this trend, exemptions are also being sought for income tax on investments in cryptocurrencies. In Parliament, the government has made it clear that there will be no tax deduction on the mining cost of cryptocurrency or any other virtual digital asset. Let us understand what effect this rule will have on the tax.
Minister of State for Finance Pankaj Chaudhary, in reply to a question from Congress MP Karti Chidambaram in the Lok Sabha, said that no tax deduction would be given on the mining cost of cryptocurrency or any other virtual digital asset. Also, if the investor incurs a loss in one digital asset transaction and gain in the other, the loss cannot be offset with the gain. The crypto industry wanted both of these to be allowed. After the government's explanation, he says that this will make investors run away from virtual digital assets. Let us understand what effect this rule will have on tax.
There are two types of expenses for an investor in virtual assets. One is the cost of mining a crypto asset and the other is the cost of that asset. The investor has to pay the price of the asset, also the cost of mining. The crypto industry wants mining costs to be included in asset purchase costs.
Income tax is assessed on the total annual income of any assessee. Income from different sources is added. Even in a stock transaction, the investor makes a profit in some stocks and may make a loss in others. He is liable to pay tax according to how much profit or loss he has incurred in the whole year. Some losses are allowed to be offset and some losses are not. This offsetting can be done in three ways. Intra head adjustment, inter head adjustment and carry forward.
ન્યૂ ફોન લોન્ચ: વનપ્લસ 10 પ્રો લોન્ચ, આ પ્રીમિયમ સ્માર્ટફોન 32 મિનિટમાં 0થી 100% ચાર્જ થશે; જાણો તેની કિંમત અને સ્પેસિફિકેશન્સ
જૂની પેન્શન યોજના અંગે લાઈવ ડીબેટ જોવા માટે
TV 9 પર જૂની પેન્શન યોજના અંગે લાઈવ ડીબેટ જોવા માટે…….અહી ક્લિક કરો.
sandesh પર જૂની પેન્શન યોજના અંગે લાઈવ ડીબેટ જોવા માટે…….અહી ક્લિક કરો.
sandesh પર જૂની પેન્શન યોજના અંગે લાઈવ ડીબેટ જોવા માટે…….અહી ક્લિક કરો.
If the income from multiple sources falls under the same head then the loss from one source can be adjusted with the advantage from another source. This is called intra head adjustment. If two different types of heads have loss in one and gain in the other then loss can be adjusted with gain. This is called inter head adjustment. If the loss in one head cannot be adjusted with any other head, then that loss is allowed to be carried forward for the next financial year.
But this is not allowed in the case of virtual digital assets. If the investor incurs a loss in this head, it cannot be adjusted with any other, nor can it be carried forward for the next financial year. In simple words, if there is profit on virtual digital asset then tax will have to be paid, but if there is loss then there will be no tax exemption.
Suppose an investor has to pay Rs 15 for mining of crypto assets and Rs 85 for buying assets. That is, the total cost was Rs. If he sells that asset for Rs. 125, he gets a profit of Rs. 25, on which he has to pay tax. But the government has made it clear that the cost of mining will not be included in the cost. That is, even if the investor has spent Rs. 100, his cost will be considered as Rs. That way he will have to pay tax at Rs 40 instead of Rs 25.
Finance Minister Nirmala Sitharaman has made provision in the budget of 2022-23 to levy income tax on crypto assets at the rate of 30 per cent. Whether the profits are short term or long term, the tax rate will remain the same. Cess and surcharge will also be added on this. This rule will take effect from 1st April, 2022. Non fungible tokens i.e. NFTs will also come under the purview of digital assets. By the way, the government will also decide which asset will be considered as virtual digital asset in terms of taxation. Many types of digital assets may come into the market in the future, so the government has left the option open. She can bring any asset under virtual digital asset or exclude it through ordinance.
Industry is demanding a review of this rule from the government. Companies that provide digital asset buying and selling platforms argue that investors would prefer to go to the gray market instead of authorized platforms if the offset is not allowed.
The Reserve Bank of India has been against a cryptocurrency from the beginning. Governor Shaktikant Das has said that it would be risky for the financial system of the country. Not only the Reserve Bank, but also the central banks of many developed countries are against the recognition of cryptocurrency. In the budget, the finance minister had said that the Reserve Bank would bring its digital currency. It is expected that the Reserve Bank will issue digital rupee in the next financial year.
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