Union Budget 2022: This is what FM Nirmala Sitharaman had to say about cryptocurrencies, NFTs

The Union Budget 2022 was announced on the second day of the Budget Session. During the budget speech, Finance Minister Nirmala Sitharama touched upon the sensitive issue of taxation of virtual assets.

During the Budget 2022 speech, she acknowledged that there is a tremendous increase in the volumes in the transactions for virtual digital assets. Considering this volume, the govt has proposed a new tax regime around the income generated by these “virtual digital assets”.

New Tax Regime proposed for ‘Virtual Digital Assets’

Under the ‘scheme for taxation of virtual digital assets’, the finance minister has proposed that any income from the transfer of any virtual digital asset shall be taxed at the rate of 30 percent. The government is yet to clarify which assets will qualify as virtual assets. Cryptocurrencies and NFTs may be the two of the biggest investment options under this umbrella.

Loss from transfer of virtual assets can’t be set off against other gains

The finance ministry has confirmed that under the proposed tax regime, no deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income.

What this means is that if the investor incurs any loss by putting in money in these virtual assets, it cannot be offset against other income. However, the capital gains will still be taxed at 30 percent, under the proposed policy.

The finance minister also proposed a TDS payment made in relation to transfer of virtual digital asset at the rate of 1 percent. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.

FM Sitharaman said, “in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.”

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