Rules Explained for Bitcoin, NFT Investors, Crypto Miners

2) There will be no deduction for any expenses incurred on cryptocurrency transactions, other than cost of acquiring such assets.

3) Loss incurred from cryptocurrency or virtual assets cannot be set-off against any other income (shares or mutual funds) of the taxpayer. Hence all loss transactions will be ignored for tax calculation and only profit will be calculated.

4) 4) Loss arising from digital asset cannot be carried forward to the next year

5) Additionally, any payment of proceeds to a taxpayer from the sale of digital assets will attract a 1 per cent TDS on transactions above Rs 50,000 in a year.

6) Gifting cryptocurrencies and NFTs will also be taxable for the recipient.

Example: If you have sold virtual digital assets worth Rs 1 lakh and the cost of acquisition is Rs 20,000. The net income from the sale of virtual asset will Rs 80,000. (Rs 1,00,000- Rs 20,000). According to the new income tax law, there will be tax liability of Rs 24,000. It must be mentioned that loss of virtual assets can be settle against loss of virtual assets.

Explaining the new rule, Manoj Dalmia, founder, Proaasetz Exchange, said, ” As per the Finance Bill one needs to follow a specific taxation regime for virtual digital asset (VDA) This includes flat 30 per cent tax on profits without any slab deduction. The loss in one VDA will not be set off from profit in another VDA. Hence all loss transactions will be ignored for tax calculation and only profit will be calculated.”

He further explained, “All trading pairs be it fiat to cryptocurrency or cryptocurrency to cryptocurrency will be a taxable event. Apart from holding and trading even gifting of digital token be will taxable in the hands of the recipients.”

Crypto Mining in India: All you Need to Know about New Income Tax 

The finance ministry also clarified that the cost of mining of crypto assets would not be allowed as a tax deduction. The cryptocurrency investors should not consider the infrastructure expenses incurred in mining virtual digital assets (VDA) to be part of the cost of acquisition.