MoS Finance Pankaj Chaudhary said infrastructure costs incurred in mining crypto assets are not deducted from income, “as will be the same for capital expenditures.”
The government clarified on Monday that crypto investors are not allowed to offset losses from one cryptocurrency against the income from another cryptocurrency. The announcement was first made by Finance Minister Nirmala Sitharaman in her budget speech when she proposed a 30 percent tax on capital gains from crypto assets effective April 1, 2022.
“Under the provisions of Proposed Section 115BBH to the Income Tax Act, 1961, the loss arising from the transfer of Virtual Digital Assets (VDA) may not be set off against the income arising from the transfer of another VDA,” MoS Finance Pankaj Chaudhary said in a written response to a question in Lok Sabha.
For example, if an investor had lost Rs 500 in Bitcoin and gained Rs 800 in Ethereum in two separate trades, he/she would still be taxed at 30 percent (Rs 240) on Rs 800 to be left with Rs 560 net. if the investor were allowed to offset his/her loss in Bitcoin against his gain in Ethereum, he/she would have been taxed with Rs 300. The Finance Bill, 2022 had proposed to insert new section 115BBH into law for taxing income from transfer or sale of cryptos.
“Treating gains and losses of each market pair separately will discourage cryptocurrency participation and slow down the industry’s growth. It is very unfortunate and we urge the government to reconsider this,” said Nischal Shetty, CEO of WazirX.
Also Read: Bitcoin vs Gold: Crypto Price Up 16%, Yellow Metal 5% – How Prices Changed During Russia-Ukraine War
Chaudhary responded to the confusion surrounding how to offset losses in one crypto against gains in another, as losses incurred from the transfer of cryptos should not be offset against other earnings. The MoS also noted that under the provisions of the new section under the IT Act, infrastructure costs, including computers and a large amount of electricity made in mining crypto assets, are not deducted from income “as the same naturally will be. of capital expenditure,” the minister added.
According to the Finance Bill, 2022, introduced by Sitharaman in parliament in February, the only exception in terms of deduction was the purchase cost of digital assets. In other words, there would be no expense deduction other than the purchase cost. Sitharaman had also proposed to deduct 1 percent tax at source (TDS) on the proceeds of all crypto transactions.
This post Govt: Crypto Investors Cannot Set Off Losses From One Cryptocurrency Against Profits From Another was original published at “https://www.financialexpress.com/digital-currency/govt-crypto-investors-cannot-set-off-losses-from-one-cryptocurrency-against-gains-from-another/2466959/”