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Virtual Digital Asset & Tax Implication On Its Income

Virtual Digital Asset & Tax Implication on its Income

CA Vikram Singh Rawat | Updated; 17 March, 2022

MEANING OF VIRTUAL DIGITAL ASSET

Virtual digital asset is proposed to mean any information or code or number or token excluding currency of any country. It includes cryptocurrency or other asset exist in digital mode and also carrying trade value in digital platform only.

It is generated through cryptographic means or otherwise.

(Cryptography is process of converting plain text into electronic code or vice versa and same is used to communicate between its users)

It provides a digital representation of value which is exchanged with or without consideration. Non-fungible tokens (NFTs) and any other token of similar nature are included in the definition.

TAXABILITY OF DIGITAL ASSET

On transfer of any Digital Asset = 30% (Value of Transfer* – Cost of Purchase)

*Tax Deduction at source would be deducted @ 1% on value of asset transfer.

ILLUSTRATION -1

A Digital Asset was purchased at a value of ₹10,00,000/-, which subsequently was transferred at ₹12,00,000 /- and transfer cost incurred of ₹50,000 /-.

Taxability on Digital Asset Transfer

= 30% (₹12,00,000/- – ₹10,00,000/-)
= 30% (₹2,00,000/-)
= ₹60,000/-

TDS on Digital Asset Transfer

= 1% * ₹10,00,000/-
= ₹10,000/-

Explanation:

Loss of relevant year would not be carry forward and also losses will not get adjusted with other source of Income.

This provision targeted all digital assets which are continuously traded in digital platform but also fall out from income tax gambit.

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