Government gets tough on cryptocurrencies, there will be big changes in tax

The government has proposed to tighten the tax rules on cryptocurrencies. The Finance Ministry has proposed further tightening of regulations for cryptocurrencies in the Finance Bill 2022. The resolution states that losses arising from transfer of virtual digital assets (VDAs) will not be allowed to be compensated by income from transfer of other digital assets. According to the Finance Bill, a virtual digital asset can be a code or number or token, which can be transferred. This asset can be held and traded electronically.

According to the information, the ministry has proposed to remove the word ‘others’ from the clause relating to compensation for loss along with gains from digital assets in the copies of the Finance Bill, 2022 to the members of the Lok Sabha. The ministry has said to do away with the exemption for the loss of any other digital asset from the gain in one virtual digital asset.

Virtual Digital Asset – VDA includes cryptocurrencies and ‘Non Fungible Tokens’ (NFTs). In the recent past, there has been an increase in the attraction of cryptocurrencies to the people in India. A large number of people are investing in it. There is a lot of craze especially among the youth regarding this.

However, the central government, including the Reserve Bank, has been raising questions from time to time regarding the growing trend of crypto. In the budget presented on February 1, the Finance Minister announced the imposition of income tax on crypto assets. The government had announced that from April 1, income from digital assets will be levied 30 per cent of income tax along with surcharge and cess on the lines of lottery profits. Also, while computing income from transfer of virtual assets, no deduction will be allowed in respect of any expenditure or allowance.

Government preparing to impose GST
It has been learned that the government is now preparing to bring cryptocurrencies under the purview of GST. The government is working on classifying cryptocurrencies as a good or service under the GST law so that its transactions can be taxed.