Budget 2022: Digital Asset Tax Regime
The expectations were running high leading to the budget surrounding the unregulated virtual digital asset class. Trading in cryptocurrency was gaining a lot of traction in the country over the last couple of years and the lack of taxation rules on such income led to a lot of speculative trading. The finance minister declared a 30 per cent tax on any income from the transfer of virtual digital assets. She also added that the losses arising from this asset class will not be set off against any other income. Subsequently, digital asset gifts will be taxed in the hands of the receiver.
Apart from the 30 per cent tax, there will also be a 1 per cent tax deducted at source on payments made on the transfer of digital assets. This will have special consequences for crypto investors as earlier there was no tax on their trading gains. It was further added that no deduction in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition.
All these regulations will help bring down the high speculative trading in this asset class and will possibly bring down the highly volatile nature of this asset class.