March 25, 2023

Budget 2022: Every crypto transaction to be subjected to TDS, says FM – Times of India

NEW DELHI: Every crypto transaction that takes place will be subject to a 1 percent tax deductible at source, clarified Finance Minister Nirmala Sitharaman on Tuesday. She added that while the only recognized digital currency will be the one issued by the Reserve Bank of India, any profit earned from investments into any form of virtual assets will be uniformly taxed at 30 percent. She also said that cryptocurrencies are not considered as currency by the government or the RBI.
While presenting the Budget, Sitharaman also said that there will be no deduction for any expenses incurred on such transactions, other than the cost of acquiring such assets. Any loss incurred from such transactions cannot be set-off against any other income of the taxpayer. In addition, any payment of proceeds to a taxpayer from the sale of digital assets will require a 1% TDS on transactions above Rs 50,000 in a year. Gifting such digital assets will also be taxable for the recipient.
“The entire scheme appears to remove ambiguity and at the same time discourage people from investing in crypto assets. Further, the Finance Minister stated that a blockchain based RBI backed digital currency (Central Bank Digital Currency (CBDC) – digital rupee) will be issued by RBI starting 2022-23 to encourage efficient and cheaper currency management system,” said L Badri Narayanan, Executive Partner, Lakshmikumaran & Sridharan Attorneys.
“Taxation at maximum rate of 30% would act as a disincentive for Cryptocurrencies as compared to other investment classes /assets,” said Maulik Doshi, Senior Executive Director-Direct Tax and Transfer Pricing Services at Nexdigm.
“The specific tax regime for Virtual Digital Assets (VDA) clears the regulatory cloud around legality of cryptocurrencies in India and will support innovation and growth of the industry. However, tax rate of 30% which places cryptocurrencies in the same category as lotteries and puzzles is certainly short-sighted and regressive considering the underlying innovation and technology involved in cryptocurrencies. Since tax is to be levied on the income from ‘transfer’ of the VDAs, it will also be important to note how ‘transfer’ is defined in the Finance Act, ” said Purushottam Anand, Founder, Crypto Legal.

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