The Indian Finance Ministry has made some clarifications on how it plans to tax cryptocurrency transactions, going forward, at a meeting with Lok Sabha, the Lower House of Parliament, yesterday.
The minister of state in the ministry of finance, Pankaj Chaudhary, explained that The Financial Bill 2022 aims to introduce section 115BBH to the Income Tax Act 1961 to allow for the taxation of income from transfers of virtual digital assets (VDAs). Chaudhary noted:
“As per the proposed section, any income from transfer of VDA shall be taxed at the rate of 30%.
Further, while computing the income from transfer of VDA, no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed.”
The minister also stated: “The bill also proposes to define VDA. If any asset falls within the proposed definition, such virtual asset will be considered as VDA for the purposes of the Act and other provisions of the Act will apply accordingly.”
Indian Finance Ministry Will Not Tax Infrastructure Costs from Mining
Meanwhile, Karti Chidambaram, a member of the Lower House of Parliament, asked minister Chaudhary “whether infrastructure costs incurred in mining cryptocurrencies are to be treated as [a] cost of acquisition and are therefore permissible deductions.”
To this question, the minister responded: “Infrastructure costs incurred in [the] mining of VDA (crypto assets) will not be treated as [the] cost of acquisition as the same will be in the nature of capital expenditure which is not allowed as deduction as per the provisions of the act.”
Chaudhary also explained that “losses incurred due to the transfer of virtual digital assets cannot be set off against any other income.” Chidambaram later asked, “whether the losses arising from the sale of one virtual digital asset can be set off against the gains arising from another virtual digital asset.”
Drawing reference from the proposed introductions, finance minister Chaudhary replied:
“Loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA.”
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