Taxation of virtual digital assets (VDAs) or “crypto tax” proposed in the Union Budget 2022-23 is set to be implemented from April 1, as the Lok Sabha on Friday passed the Finance Bill, 2022.
The Lok Sabha also passed the amendments introduced in the Finance Bill, 2022 regarding clarification on taxation of virtual digital assets.
Section 115BBH of the Bill deals with tax on virtual digital assets. Clause (2)(b) prevents loss on the trading of cryptocurrency assets from being set off against income under “any other provision” of the IT Act.
As per the amendment, the word “other” is dropped. Under the amended law, loss from crypto assets cannot be set off against gains in crypto assets as well.
“The proposed 30 percent tax irrespective of whether crypto-assets are capital assets or not will be detrimental to the investor growth that the industry has been seeing so far. This move will make day-traders incapable of saving on taxes even if they aren’t in the income tax brackets currently,” said Nischal Shetty, Founder and CEO of crypto exchange WazirX.
“Furthermore, not allowing investors to offset losses from one crypto trading pair by gains from another type will further deter crypto participation and throttle the industry growth,” he said.
Shetty said the new regulation would not provide desired results to the government.
“It can result in cascading participation on Indian exchanges that adhere to the KYC norms and lead to a rise in capital outflow to foreign exchanges or to the ones that aren’t KYC compliant. This is not conducive for the government or the crypto ecosystem of India,” he said.
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