Indian Government Reveals How It Plans to Tax Cryptocurrency Transactions – In parliament, India’s finance minister revealed how the government intends to tax bitcoin transactions. Gains from crypto transactions will be taxed at 30%, while losses will not be deducted, according to a proposed new part of the Income Tax Act.
The Indian ministry of finance responded to queries about how cryptocurrency transactions will be taxed in the future in the Lok Sabha, the lower house of parliament, on Monday.
The Financial Bill 2022 proposes to amend section 115BBH to the Income Tax Act 1961 to provide for the taxation of income from transfers of virtual digital assets, according to Minister Pankaj Chaudhary, the minister of state for finance (VDAs).
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“According to the proposed clause, any revenue derived from the transfer of VDA will be taxed at a rate of 30%.”
“Furthermore, no deduction in respect of any expenditure (other than cost of acquisition) or allowance is allowed when determining the income from the transfer of VDA,” the minister added.
“The law also attempts to define VDA,” Minister Chaudhary continued. If any virtual asset meets the proposed definition, it will be treated as a VDA for the purposes of the Act, and other provisions will apply accordingly.”
Karti Chidambaram, a member of the Lok Sabha, specifically asked the finance minister “if infrastructure costs paid in mining cryptocurrencies are to be recognized as cost of acquisition”
Minister Chaudhary went on to say:
“Infrastructure expenditures paid in mining VDA (e.g. crypto assets) will not be considered as cost of acquisition because they will be in capital expenditure, which is not allowable as a deduction under the act’s requirements.”
Chidambaram went on to say that “although losses incurred due to the transfer of virtual digital assets cannot be set off against every income,” he also wondered if “losses arising from the sale of one virtual digital asset can be set off against gains emerging from another virtual digital asset.”
The minister of state responded, citing the proposed provisions:
“Losses incurred as a result of the transfer of a VDA will not be allowed to be offset against income derived from the transfer of another VDA.”
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According to PTI, the Indian government is also working on classifying cryptocurrency under the Goods and Services Tax (GST) law so that it can be taxed on the entire value of transactions.
The existing law according to the publication does not have a clear definition for cryptocurrency, and 18% GST is only imposed on services offered by crypto exchanges that are classified as financial services.
In the meantime, India’s government is drafting cryptocurrency legislation. A crypto law was scheduled to be debated during parliament’s winter session, however it was not taken up. The government, according to reports, needs more time to finalize the bill.