Govt Passes Finance Bill: Crypto To Start Attracting 30% Tax From April 1, TDS To Begin From July 1

With Finance Bill, 2022, getting passed in the Lok Sabha last Friday, the Budget 2022¡¯s proposals surrounding crypto tax will start coming into effect.

Starting April 1, 2022, i.e. the new financial year 2022-23, the proposed 30% tax on crypto income would be levied, whereas the 1% TDS on payments towards virtual currencies would begin on July 1, 2022.

A day before the bill was passed, the government had proposed to tighten the norms for taxation of cryptocurrencies by disallowing set off of any losses with gains from other virtual digital assets, according to PTI.

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But as per the amendments to the Finance Bill 2022, the ministry proposes to remove the word 'other' from section relating to set off of losses from gains in virtual digital assets.

This would mean that loss from the transfer of virtual digital assets (VDA) will not be allowed to be set off against the income arising from the transfer of another VDA.

According to the Finance Bill, 2022, a VDA could be a code or number or token which can be transferred, stored or traded electronically, including prevailing cryptocurrencies and non-fungible tokens (NFTs) which have gained fad over the past few years.

Also Read: Income Tax Department To Issue Notices To 700 Crypto Investors, Could Levy Penalty, 30% Tax & Interest

The 30% Tax & 1% TDS

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From April 1st 2022, a 30% income tax plus cess and surcharges will be levied on crypto transactions in the same manner as it treats winnings from horse races or other speculative transactions.

Also, while computing the income from the transfer of VDA, no deduction in respect of any expenditure (other than the cost of acquisition) or allowance will be allowed.

The Budget 2022-23 also proposed a 1% TDS on payments towards virtual currencies beyond ?10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be ?50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the income tax act.

From July 1, 2022, the 1% TDS will be implemented, which will be deducted from the whole transaction value, irrespective of whether an investor makes a profit or loss.

The 'Crypto Killer'?

It's being believed that this ¡®punishing crypto tax¡¯ clearly shows the government¡¯s stance against crypto, with the crypto industry worrying that these may be enough to kill the liquidity in the market and ensure that investors flee away from crypto.

Also Read: Countries Where Cryptocurrency Is Taxed

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