Mumbai :Presenting the Budget, Finance Minister Nirmala Sitharaman proposed to tax any income from transfer of any virtual digital asset at 30 per cent and impose a 1 per cent tax deduction at source of transactions above a monetary threshold.
Nirmala Sitharaman said it should not be seen as a step towards legalising or recognising cryptocurrencies. “There is a process of consultation, which is going on, about crypto,” she said.
Though it made some experts feel that the measure was a step towards legitimising it, a day later, Finance Secretary TV Somanathan cleared the air that crypto currency would never be a legal tender. In an interview, Somanathan said just like gold and diamond, despite being valuable, are not a legal tender, private cryptocurrencies too will never be a legal tender.
Earlier, Sitharaman said taxing the digital currencies was justified as there had been a phenomenal increase in transactions in virtual digital assets, making it imperative to provide for a specific tax regime.
There will also be no deduction in respect of any expenditure or allowance except the cost of acquisition while computing this income. Also, the loss from transfer of virtual digital assets cannot be set off against any other income. Estimates put the number of crypto investors between 1.5 and 2 crore.
In order to capture the transaction details, Sitharaman also proposed TDS on payment made for transfer of virtual digital at 1%. Gift of virtual digital assets is also proposed to be taxed in the hands of the recipient, she said. Security agencies have expressed concerns over the misuse of digital coins on Dark Web for terror acts, drugs trafficking and money laundering.
“Virtual digital assets have gained tremendous popularity in recent times and the volumes of trading in such digital assets has increased substantially. Further, a market is emerging where payment for the transfer of a virtual digital asset can be made through another such asset. Accordingly, a new scheme to provide for taxation of such virtual digital assets has been proposed in the Bill,” the explanatory memorandum of the Finance Bill notes. AGENCIES