India says Rs 157 crore tax collected in 2022-23

Along the lines of taxing Virtual Digital Assets (VDA), the Union Finance Ministry has informed that for FY2022-23, direct tax levied in the form of tax deducted at source under Section 194S of the Income Tax Act, 1961, on payments made on transfer of virtual digital assets, aggregating to Rs 157.9 crore till March 20, 2023.

The ministry issued a written reply to Janata Dal (United) MP Ram Nath Thakur who had asked for details of tax received by the government from cryptocurrency.

Crypto assets are unregulated in India. However, the government brought in a comprehensive taxation regime for the transfer of VDAs during the preview of the Prevention of Money Laundering Act 2002.

RBI has recommended that crypto assets should be banned. Crypto assets are by definition borderless and require international cooperation to prevent regulatory arbitrage, the ministry said in the House.

Taxation of VDAs is a major step by the government to provide clarity to investors and entrepreneurs dealing in digital assets in India and is a step towards regulating the crypto industry.

What are virtual digital assets and provisions for regulation in Budget 2022-23?

That means cryptocurrencies, DeFi (decentralized finance) and non-fungible tokens (NFT). It immediately excludes digital gold, central bank digital currency (CBDC) or other traditional digital assets, and therefore targets specific taxation of cryptocurrencies.

The government will tax the profits made from transactions of such private assets or virtual digital assets at 30 percent. This will be done regardless of the long-term or short-term holdings of the investor.

TDS will be levied on crypto asset transfer payments at a rate of 1 percent for transactions above a certain threshold. No deductions shall be made for expenses or allowances when calculating such income, apart from the cost of acquisition.