On Friday, Lok Sabha approved the Virtual Digital Asset (VDA) or “Crypto Tax” tax rules that were proposed in the 2022-23 budget by approving the 2022 Finance Bill. These new tax rules should come into effect from April 1, 2022.
Under the bill, Section 115BBH deals with taxes on virtual digital assets, while clause (2)(b) prohibits deducting a loss of crypto assets from income under “any other provision” of the law. computer law. Additionally, the word “other” is removed for VDAs as part of the bill.
With this, a 30% capital gains tax is imposed on crypto transactions. In addition, a loss incurred in the transfer of the virtual asset will no longer be able to be compensated by any income calculated under the “other” provision of the Information Technology Act, because the word “other” has been deleted.
This means that regardless of your level of income from crypto assets, they will be liable for the 30% tax rate from April 1, 2022. In view of this, if an investor decides to book their profits or losses in his crypto assets before March 31, he will then pay tax at a marginal rate.
Not only that, an investor will also not be allowed to adjust their loss incurred in a crypto asset against income taken in other cryptos from April 1st. With that, at least before March 31, investors can still adjust their crypto losses against other gains.
Additionally, the amendment under the bill also imposes a 1% withholding tax (TDS) on Indians buying or selling crypto along with crypto gift taxes. Unlike the 30% capital gains tax in VDA, the TDS will come into effect from July.
Finance Minister Nirmala Sitharaman during the discussion of the Finance Bill 2022 at the Lok Sabha said: “There is no confusing signal. We are very clear that there are consultations going on whether we want to regulate it or regulate it to some degree, or a lot or completely ban it. Once the consultations are done, the question will come out, but until then, we are taxing it because many transactions are taking place there. She added that the government has clarified its position and said it will tax income generated through taxes because people take money and assets are bought and sold.
Impact of the Finance Bill 2022 on cryptocurrency and investments.
Probir Roy Chowdhury, Partner, J Sagar Associates (JSA) said: “While many in the cryptocurrency industry initially welcomed the inclusion of ‘virtual digital assets’ in the 2022 Finance Bill (“finance bill”) – announced as the implicit acceptance of the government. of cryptocurrency, a closer look at the finance bill demonstrates the government’s reluctance to encourage growth in this space. The finance bill aims to impose a 30% flat tax on cryptocurrency earnings. While this would result in a 5% increase in tax payable by businesses trading cryptocurrencies, it would more significantly affect small “retail investors” who may be in lower tax brackets or who are shy. rely on lower capital gains tax rates.
Chowdhury further added, “The volatility of many cryptocurrencies has created a thriving community of high-frequency traders, who will be significantly affected by the drop in liquidity on every trade.”
“Finally, the biggest setback for the Indian cryptocurrency industry is the Finance Bill’s ban on offsetting the losses of one cryptocurrency against the gains of another. Such a move could cripple the industry and seriously affect traders who rely on hedging to provide risk mitigation in their investments. . Crypto players need to present a united front and challenge these authoritarian arrangements. Trading in crypto/virtual digital assets is not akin to gambling and this distinction needs to be clarified,” Chowdhury added.
Trading in the cryptocurrency market has been a controversial concept due to its decentralized nature and lack of transparency. Cryptocurrencies have no intermediaries such as banks, financial institutions or central authorities. The nature of cryptocurrency is more bubble-like currently, it has its extreme highs and lows, and having a clear trajectory on these digital coins is largely uncertain. However, trading in the crypto market is similar to buying and selling other currencies used. At present, the world of digital currency has evolved and is indeed considered as the new era of digital commerce to further strengthen the blockchain market.
According to CoinMarketCap, there are approximately 18,470 cryptos available for trading with a global market cap of over $2 trillion. Bitcoin continues to lead the crypto market, followed by Ethereum, Tether, BNB, USD Coin, XRP, Cardono, Solana, Terra, and Avalanche, among others.
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Government Tax Rules In Cryptos Effective April 1; Should You Sell Your Crypto Assets Before March 31st? – Tech Tribune France
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