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GST on cryptocurrency likely as council may take decision next week

In what could further spoil the mood of crypto investors in the country, GST council will meet next week to discuss a goods and services tax (GST) on cryptocurrency transactions, a report by Bloomberg suggested.

The panel, comprising federal and states’ finance ministers, is seeking to broaden the tax net to track dealings in virtual digital assets in a more effective manner, as per the report. The GST panel is meeting for two days starting Tuesday, June 28, 2022 in Chandigarh, and is unlikely to finalize a rate in the upcoming meeting but discussions may be held on placing cryptocurrency in the highest tax slab of 28%, the report added.

Meanwhile, the Central Board of Direct Taxes (CBDT) issued an FAQ on the TDS provisions on virtual digital assets (VDA) or cryptocurrencies, which was introduced in 2022-23 Budget and will be effective from July 1.

The income tax department on Wednesday said the 1% TDS on transfer of virtual digital assets would be levied on net transaction value and the onus of deducting the tax would primarily be on the exchanges.

The frequently asked questions (FAQ) said in a peer-to-peer (direct buyer to seller) transaction, the buyer paying the consideration will be required to deduct the tax deducted at source (TDS).

However, in case the transaction is taking place through an exchange, the onus of deducting TDS will be on the exchange which is crediting or making payment to the seller. The FAQ further said for transfer of VDAs owned by the exchanges, the buyer or his/her broker would be required to deduct the tax.

Earlier this year, Finance Minister Nirmala Sitharaman imposed a levy of 30% on income from transfer of virtual assets and a 1% tax at source on all crypto transactions in a bid to assess the size of crypto market in the country and track users. The move was seen as removing uncertainty about the legal status of crypto transactions.

Digital assets have been selling off all year along with other risky holdings as global central banks have shifted to hiking interest rates to quell soaring inflation.

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Cryptocurrency Tax in India: Crypto Tax Filing Guide FY 2022-2023 – Key points explained

Cryptocurrency Tax in India (FY 2022-2023): The Union Budget 2022 proposed to classify cryptos as virtual digital assets (VDA). Even as crypto has been specified as assets, tax treatment is not like other assets. As per the new crypto tax rule, an individual has to pay a flat 30 percent tax on income earned from transfer of cryptocurrencies and other virtual digital assets, including NFTs. 

According to Archit Gupta, founder and CEO of Clear (formerly Cleartax), the taxpayer is not allowed any deduction from the crypto asset’s sale price, except the cost of acquisition. The government recently clarified that the mining infrastructure costs will not be included in calculation of the cost of acquisition. 

Crypto Tax Rule: No set-off of losses allowed 

The intra-head adjustment of losses, i.e. set-off of loss arising from one VDA with the income from another VDA, is not permitted. Explaining this with an example, Gupta said, if you have a loss from the transfer of Bitcoin and have profited from the transfer of NFTs, you cannot knock off the Bitcoin loss from the profits on the transfer of NFTs. You will have to pay a flat rate of 30 percent tax on profits from NFT transfer. 

Further, losses from crypto transfer cannot be set off against income under any other head. This means, gains from the sale of equity, mutual funds, assets such as property, etc., won’t be allowed to be set off from loss from crypto.

Crypto Tax Rule: No carry forward allowed

The crypto tax law mandates that the taxpayer cannot carry forward cryptocurrency losses. 

“If you have a loss from the transfer of crypto in one financial year, it cannot be carried forward to the next year to set off against future gains,” Gupta told FE Online. 

ALSO READ | How to avoid becoming a fool during crypto crash: 10-point guide

Crypto Tax filing Date: When Will You Have to Pay 30% Crypto Tax?

The taxpayer will have to pay 30 percent tax on cryptocurrency and other VDAs from Assessment Year 2023-24. That means all your income from the transfer of VDAs in FY 2022-23 will be taxed at the rate of 30 percent. 

Gupta suggested that crypto investors should calculate their advance tax liability after considering the tax on income from the transfer of crypto and NFTs and pay the advance tax instalments accordingly.

Tax on Exchange of Crypto in Business Transaction

The government has made it clear that virtual digital assets (VDA) are not currencies. 

“However, the term ‘transfer’ is not defined in relation to virtual digital assets as it is defined for capital assets in the Income Tax Act. The law needs to clarify what ‘transfer’ means and whether it covers transactions where goods or services are purchased against cryptos,” said Gupta. 

“If the law clarifies considering such transactions under the definition of ‘transfer’, then the TDS provision will apply here,” he added. In this case, a person transferring crypto will be required to deduct TDS because a transfer has taken place. Such an event will be taxable in the hands of the one transferring crypto. 

ALSO READ | Top Crypto Prices on June 4

Besides, the business will be required to report receipts based on the value (FMV) of crypto accepted as a consideration for providing goods or services. If the business sells or transfers these cryptos in any manner, again, an event of a transfer of crypto will take place, and tax will have to be paid on such transfer.  

 Tax on Crypto/NFT Airdrops or Gaming Coins

Crypto and NFT companies often use airdrops to promote the launch of their project. Airdrops are similar to receiving a voucher with a discount code in your email.

“Such crypto airdrops or coins earned through gaming may be considered gifts within the construct of the Income Tax Act, and such gifts are taxable in the hands of the recipient,” said Gupta. 

Tax on Crypto Received As Gift

The Government has also expanded the definition of specified movable assets to include virtual digital assets. Thus, gifts received in the form of crypto assets would be taxable if the fair market value exceeds the threshold limit of Rs 50,000. 

However, Gupta said that the plain reading of the crypto tax provisions conveys that the gift received from relatives or on specific occasions will be exempt from tax. 

(Cryptos and other virtual digital assets are unregulated in India. They are considered extremely risky for investment. Please consult your financial advisor before making any investment decision)




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Goods or services? GST law committee’s cryptocurrency dilemma

Tax treatment decision after there’s clarity on classification

Topics
cryptocurrency | GST



After taxing income from virtual digital assets, the government is looking to soon bring clarity on the applicability of the goods and services tax (GST) on assets.



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Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

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First Published: Thu, June 09 2022. 06:12 IST




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Cryptos’ Deposit And Withdrawal Functions Disabled Until Regulations: Exchange

Cryptos' Deposit And Withdrawal Functions Disabled Until Regulations: Exchange

Cryptocurrency exchanges are in talks with government for regulations on daily transactional activities

Cryptocurrency exchanges are in talks with the government for working out regulations on the daily deposit and withdrawal activities of investors.

CoinSwitch, one of the top digital assets exchanges in the country, has said its cryptocurrencies’ deposit and withdrawal functions will remain disabled until regulations are put into place.

The exchange said this after a few investors complained on Twitter about not being able to access their accounts for the past few weeks.

In response to complaints, CoinSwitch tweeted, saying, “the crypto deposit/withdrawal function will remain disabled until we bring in the regulation, as we are already in talks with regulators and policymakers.”

That development adds to a long list of uncertainty about the outcome of the proposed digital assets legislation outcome.

The bill is delayed, with reports suggesting the government will wait for a global consensus before enlisting it in the Parliament.

While there is no official data on cryptocurrency investments and transactions in India, a conservative estimate suggests around 20 million investors with roughly $6 billion in holdings, with a large market base yet to be tapped into.

Industry experts believe that reforms to the bill with more comprehensive consultations can make India a crypto hub and forefront of blockchain tech.

While the government had previously said it aims to promote underlying technologies such as blockchain, in the budget, the government imposed a steep 30 per cent tax on income from trade in cryptocurrencies and a 1 per cent TDS levy on every such transaction, starting from April 1, 2022.

That decision was announced in the union budget for 2022-23 by Finance Minister Nirmala Sitharaman.

Also, the new tax clarification that digital assets’ losses incurred in a transaction cannot be offset from profits made through another transaction has received a lot of criticism.

(Disclaimer: Coinswitch is an advertiser on the NDTV Network)




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Government Working On FAQs On The Digital Assets’ Taxation

Government Working On FAQs On The Digital Assets' Taxation

FAQs on taxation of crypto, virtual digital assets in works

New Delhi:

The government is working on a set of FAQs (Frequently Asked Questions) on the taxation of cryptocurrencies, which will give a nuanced clarification on the applicability of income tax and GST on virtual digital assets, an official said.

The set of FAQs, drafted by the Department of Economic Affairs (DEA), the RBI and the Revenue Department, would also be vetted by the law ministry, the official added.

“FAQ on taxation of cryptocurrency and virtual digital assets is in works. Although FAQs are for information purposes and do not have legal sanctity, the law ministry’s opinion is being sought to ensure that there is no loophole,” the official told PTI.

The DEA, Revenue Department and the Reserve Bank are working to ensure that the taxation aspect is clear both for field tax offices and those who deal with cryptocurrencies and other virtual digital assets.  The 2022-23 Budget has clarified the levy of income tax on crypto assets. From April 1, a 30 per cent income tax plus cess and surcharges will be levied on such transactions in the same manner as the tax law treats winnings from horse races or other speculative transactions.

The Budget 2022-23 also proposed a 1 per cent TDS (tax deducted at source) on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient.

The threshold limit for TDS would be Rs 50,000 a year for specified persons, including individuals/HUFs who must get their accounts audited under the I-T Act.

The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1.

From the GST perspective, the FAQ is likely to clarify whether cryptocurrency is a good or service.

Currently, 18 per cent of Goods and Services Tax (GST) is levied only on services provided by crypto exchanges and is categorised as financial services.

The GST law does not mention the classification of cryptocurrency. In the absence of a law regulating such virtual digital currencies, the classification must consider whether the legal framework categorises it as an ‘actionable claim’.

An actionable claim is a claim that a creditor can make for any type of debt other than a debt secured by a mortgage of immovable property.  

The government is working on legislation to regulate cryptocurrencies, but no draft has yet been publicly released.


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Rules Explained for Bitcoin, NFT Investors, Crypto Miners

Starting from April 1, cryptocurrency users need to pay income tax on the gains from the virtual assets. Finance minister Nirmala Sitharaman introduced a new section 115BBH to provide a method of computation and tax rate for the income arising from the cryptocurrencies, Nonfungible tokens or NFTs and other virtual digital assets. According to the proposed rule, a flat 30 per cent tax will be levied on all virtual assets. A 1 per cent tax deductible at source (TDS) will also be applicable on all transactions involving cryptocurrencies and all digital assets. Moreover, the losses incurred from the one kind of virtual digital assets can not be set off against the gains from any transaction involving another digital tokens.

All you Need to Know About the New Cryptocurrency Tax:

1) The income from the sale of virtual assets such as cryptocurrencies, NFTs will be taxed at a flat rate of 30 per cent

2) There will be no deduction for any expenses incurred on cryptocurrency transactions, other than cost of acquiring such assets.

3) Loss incurred from cryptocurrency or virtual assets cannot be set-off against any other income (shares or mutual funds) of the taxpayer. Hence all loss transactions will be ignored for tax calculation and only profit will be calculated.

4) 4) Loss arising from digital asset cannot be carried forward to the next year

5) Additionally, any payment of proceeds to a taxpayer from the sale of digital assets will attract a 1 per cent TDS on transactions above Rs 50,000 in a year.

6) Gifting cryptocurrencies and NFTs will also be taxable for the recipient.

Example: If you have sold virtual digital assets worth Rs 1 lakh and the cost of acquisition is Rs 20,000. The net income from the sale of virtual asset will Rs 80,000. (Rs 1,00,000- Rs 20,000). According to the new income tax law, there will be tax liability of Rs 24,000. It must be mentioned that loss of virtual assets can be settle against loss of virtual assets.

Explaining the new rule, Manoj Dalmia, founder, Proaasetz Exchange, said, ” As per the Finance Bill one needs to follow a specific taxation regime for virtual digital asset (VDA) This includes flat 30 per cent tax on profits without any slab deduction. The loss in one VDA will not be set off from profit in another VDA. Hence all loss transactions will be ignored for tax calculation and only profit will be calculated.”

He further explained, “All trading pairs be it fiat to cryptocurrency or cryptocurrency to cryptocurrency will be a taxable event. Apart from holding and trading even gifting of digital token be will taxable in the hands of the recipients.”

Crypto Mining in India: All you Need to Know about New Income Tax 

The finance ministry also clarified that the cost of mining of crypto assets would not be allowed as a tax deduction. The cryptocurrency investors should not consider the infrastructure expenses incurred in mining virtual digital assets (VDA) to be part of the cost of acquisition.

“The new cryptocurrency tax even covers miners as no expenses of setting up mining are allowed as deduction. Therefore mining transaction cost of purchase will be Zero. What can be set off is only the cost of acquisition or purchase on VDA,” Dalmia added.

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Cryptocurrency Tax To Kick Off From April 1. Here’s What You Need To Know

Cryptocurrency Assets Sold At A Profit Will Be Subject To A 30% Tax From April 1. Here?s What You Should Know

Union budget for 2022-23 has proposed a 30 per cent tax on cryptocurrency assets

Cryptocurrency gains will be taxed at 30 per cent beginning April 1. It’s the highest tax bracket and the rate is the same as earnings from a lottery. This would apply to all virtual digital assets (VDA) and their earnings, from Bitcoin to non-fungible tokens (NFTs). For example, if an investor purchases a cryptocurrency for Rs 10,000 and sells it for Rs 15,000, making a profit of Rs 5,000, they must pay a 30 per cent tax of Rs 1,500.

The Union Budget 2022-23 had proposed a 30 per cent tax on cryptocurrency assets. A 1 per cent tax deducted at source (TDS) on virtual currency contributions exceeding Rs 10,000 per year was also recommended.

Cryptocurrency investors, however, will need to be aware of a few regulations in order to stay on the right side of the law in the 2022-23 fiscal.

If an investor is in loss overall with no earnings, there will be no tax to pay after accounting for all cryptocurrency transactions that have been done for the year.

Similarly, investors won’t be taxed if they have purchased a crypto asset that has considerably increased in value but are yet to sell it. Till they sell it and make a profit, their gains will not be taxed.

Losses incurred from one kind of VDA cannot be set off against the gains from any transaction involving another VDA while computing tax. This implies that investors will have to pay a 30 per cent tax for every gain they make and losses are not deductible from the final taxation amount if different tokens are traded. So, when you earn a profit on one token but lose on the other, you are still obligated to pay a tax of 30 per cent on the profited token.

On July 1, 2022, the 1 per cent TDS will be implemented. This TDS will be deducted from the whole transaction value, irrespective of whether an investor makes a profit or loss.

Professionals and those owning a business won’t be able to set off profits or losses between their primary income and cryptocurrency income.


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What exactly is cryptocurrency and how it works?

A day after the budget, Finance Secretary TV Somnathan said the govt doesn’t treat trading in crypto assets as illegal. Find out what is cryptocurrency and the challenges it is posing for the govt

Topics
cryptocurrency | digital currency | RBI



Team TMS  | 
New Delhi 

A day after the Budget 2022, Union Secretary TV Somnathan told a business news channel that the government doesn’t treat trading in crypto assets as illegal.

They will be treated in the same way as betting on horse racing or any other speculative transaction. In first such case, Pune Police on Wednesday arrested a constable and six of his accomplices for allegedly kidnapping a trader and demanding Bitcoin ransom worth $40 million. Find out more about cryptocurrency, how it works and what challenges it is posing before the government today.

Watch video


Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor



First Published: Fri, February 04 2022. 08:45 IST




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