Income tax calculation: The minister also said that when calculating the income from the transfer of VDA, no deduction of expenses or fees is allowed
Income Tax Return: Much to the disappointment of crypto traders, investors and industry experts, the central government has clarified that losses from one type of crypto or virtual digital asset cannot be offset against gains from other crypto assets when calculating income taxes.
For example, if you make a loss in Ethereum and gain in Bitcoin, you cannot offset the loss against the gain while charging 30% tax, the government said.
Ahead of the start of the new fiscal year 2022-23, the clarification was provided by Union Minister of State of Finance Pankaj Chaudhary in a written response to a question on Monday (March 21, 2022). He indicated that the loss from the transfer of VDA may not be set off against the income arising from the transfer of another VDA.
The minister also said that when calculating the income from the transfer of VDA, no deduction of any expense (other than the acquisition costs) or compensation is allowed.
Commenting on the clarification, Rohinton Sidhwa, Partner, Deloitte India said: “It is an ongoing effort to isolate and discourage cryptocurrency-related activities in India. The rejection of mining fees is unlikely to affect the majority of traders, but preventing offsetting between different cryptos is likely to negatively impact many traders.
30% tax on VDA transfer income was announced by Finance Minister Nirmala Sitharaman in her 2022 budget speech. “…for the taxation of virtual digital assets, I propose that all transfer income of virtual digital assets be taxed at the 30 percent rate,” the FM had said.
Crypto industry insiders are disappointed with the clarification provided by the government.
“According to Mr Chaudhary’s response in today’s parliament, investors will not be able to offset the losses of one crypto trading pair with gains of another type. In addition, it also states that the costs of the mining infrastructure will not be included in the acquisition price to be claimed as a deduction. Treating gains and losses of each market pair separately discourages cryptocurrency participation and slows the industry’s growth. It is very unfortunate and we urge the government to reconsider,” said Nischal Shetty, CEO of WazirX.
Ashish Singhal, co-founder and CEO of CoinSwitch, said: “This is hurting the Indian crypto industry and the millions that have invested in this emerging asset class. We fear the lack of provisions to offset losses will affect users of KYC-compliant exchanges and platforms into the underground peer-to-peer gray market, which would defeat the purpose of the tax.”
“The Budget recognized virtual digital assets (VDAs) as an emerging asset class. It would therefore have been logical to gradually align regulation with other asset classes. Instead, today, with this clarification, we have taken a step back. If a regressive provision such as this had been applied to equities, it would have discouraged private investors from participating,” he added.
This post Income Tax Calculation: Disappointment as Modi Government Makes This Major Clarification Before April 1 was original published at “https://www.financialexpress.com/money/income-tax/income-tax-calculation-disappointment-as-modi-govt-makes-this-big-clarification-before-april-1/2466956/”