New Delhi, March 21 (SocialNews.XYZ) Infra costs incurred on mining of virtual digital assets (VDA) such as cryptocurrencies will not be included as a deduction under the Income Tax Act, the government told the Parliament on Monday.
"The Finance Bill, 2022 has proposed to insert section '115BBH' to the Income Tax Act to provide for taxation of income from transfer of virtual digital assets (VDA). As per the proposed section, any income from transfer of VDA shall be taxed at the rate of 30 per cent. Besides, while computing the income from transfer of VDA, no deduction in respect of any expenditure other than the cost of acquisition or allowance is allowed.
"As per the proposed provisions of section '115BBH', infrastructure costs incurred in mining of VDA (eg. crypto assets) will not be treated as cost of acquisition as the same will be in the nature of capital expenditure which is not allowable as deduction as per the provisions of the Act," Minister of State for Finance Pankaj Chaudhary told the Lok Sabha in a written reply.
On the question of whether the losses from the sale of one VDA can be set off against the gains arising from another, he said: "As per the provisions of the proposed section '115BBH'... loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA."
India's crypto industry called the move as detrimental for millions investors in this emerging asset class.
"We fear the lack of provision to offset losses will drive away users from KYC-compliant exchanges and platforms to the underground peer-to-peer grey market, which would defeat the purpose of the tax," said Ashish Singhal, Co-founder and CEO, CoinSwitch.
"The Budget recognised virtual digital assets (VDAs) as an emerging asset class. Therefore a natural course of action would have been to progressively bring the regulations at par with other asset classes. Instead, today, with this clarification, we have taken a step backwards. If a regressive provision such as this would have been applicable in equities, it would have discouraged retail investors from participating."
Rohinton Sidhwa, Partner, Deloitte India, said: "It's a continued effort to isolate and disincentivise crypto currency related activities in India.
"The mining expense disallowance is unlikely to impact the majority of traders, however the prevention of offset between different cryptos will probably negatively impact many traders."
Source: IANS
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