Indore: ‘In Budget, cryptos defined as Virtual Digital Assets’

Indore (Madhya Pradesh): “The Budget for the financial year 2022-’23 has clearly laid out a few guidelines and regulations pertaining to crypto currencies. For taxation purposes, crypto currencies have now been defined as Virtual Digital Assets (VDAs). They are also known as a Non-Fungible Tenders (NFTs). If the transfer of VDAs results in a loss, such loss cannot be set-off against any other income, nor shall such loss be an allowed to be carried forward to subsequent tax years,” said CA Manish Dafaria, while presenting the Budget analysis at a special session organised by the Indore Management Association here on Tuesday. The topic of the session was ‘Insights into Taxation of Crypto & NFT’.

The speaker of the session, CA Dafaria, is a tax expert and also IMA executive committee member. The programme was moderated by CA Navin Khandelwal.

CA Dafaria explained that a crypto currency or crypto is a digital currency designed to work as a medium of exchange for Non-Fungible Tokens or NFTs. “They are now the hottest digital assets recorded and transferred on a block chain. They are so hot that Collins Dictionary has named ‘NFT’ as the word of the year 2021. The recent Budget has put out some guidance giving clarity on how it will be taxed. Yet, there remain some stark question marks over how certain provisions will play out, for instance, whether a GST will be applicable on it or not. First, there are a number of theories around cthe crypto currency, especially about its legal validity and the taxation play around it in the Indian context, some of which are still ambiguous. So, let’s try to dig deeper to understand at what level the Budget has now made the big canvas clear on crypto currency,” said Dafaria.

VDA also includes non-fungible tokens (NFTs). NFTs are unique, non-interchangeable digital tokens which can be traded using crypto currency. In the Budget, provision is made for a tax of 30% on income from crypto currencies. Loss from transfer of any VDA cannot be set-off against any other income. No deduction in respect of any expenditure other than cost of acquisition shall be allowed while computing the income from transfer of virtual digital currency.

Dafaria said that no other loss or allowance can be set-off against gains from transfer of virtual digital currency. While the government has clarified its stand from the income-tax perspective, no clarity has been provided with respect to crypto currencies from a GST standpoint. There are various aspects on which clarity is required under GST law so that investors are sure of GST implications and are able to make more informed decisions.

Published on: Tuesday, February 08, 2022, 09:28 PM IST