Indian Government Collects Rs 157.9 Crore in Direct Taxes from Virtual Digital Assets in FY2022-23
Indian Government takes steps towards regulating the crypto industry and preventing misuse of digital assets
The Union Finance Ministry has reported that, in FY2022-23, a total of Rs 157.9 crore has been collected as direct tax through tax deducted at source under section 194S of the Income Tax Act, 1961, on payments made for transferring Virtual Digital Assets (VDA) until March 20, 2023. This comes as part of the government’s efforts to impose taxes on VDAs and regulate the crypto industry.
The ministry gave a written reply to Janata Dal (United) MP Ram Nath Thakur who had asked about details of tax received by the government from cryptocurrency.
Comprehensive taxation regime for transfer of VDAs
Crypto assets are unregulated in India. Nonetheless, the government has introduced a comprehensive taxation system for the transfer of Virtual Digital Assets (VDAs) within the framework of the Prevention and Money-laundering Act of 2002.
According to the regulations outlined in Budget 2022-23, any profits generated during the transaction of privately created or virtual digital assets will be subject to a 30 percent tax rate, irrespective of whether the investor held them for the long-term or short-term.
Tax Deducted at Source (TDS) will be imposed on payments for the transfer of crypto assets at a rate of 1 percent for transactions over a certain threshold. While computing such income, no deduction on expenditure or allowance, except for the cost of acquisition, shall be permitted.
VDAs Defined
It’s important to note that virtual digital asset refers to cryptocurrencies, DeFi (decentralised finance), and non-fungible tokens (NFTs). The provision is targeted at taxing cryptocurrencies in particular and excludes digital gold, central bank digital currency (CBDC), or any other traditional digital assets.
Regulatory recommendations by RBI
The RBI has recommended that crypto assets should be prohibited as they are borderless and require international collaboration to prevent regulatory arbitrage, the ministry said in the house.
Significant step towards regulating the crypto industry
The government’s decision to tax VDAs is a significant step towards regulating the cryptocurrency industry and giving clarity to investors and businesspeople who deal in digital assets in India.
The move towards taxing VDAs is a significant step towards regulating the crypto industry in India, providing clarity to investors, and preventing the misuse of digital assets for money laundering and other illegal activities.
Disclaimer
The information presented in this Blogpost is solely for educational and informative purposes and should not be misconstrued as investment, financial or legal advice. Cryptocurrencies are a highly unstable and speculative market and their worth is susceptible to substantial fluctuations. Therefore, it is advisable to conduct personal research and seek counsel from qualified experts before making any financial decisions.
