New Income Tax Bill: Virtual Digital Assets And Taxation On Cryptocurrency (image:pixabay)

New Income Tax Bill: During the recent Budget presentation, Finance Minister Nirmala Sitharaman has proposed inclusion of Section 285BAA in the Income-tax Act, 1961, wherein entities dealing in crypto assets has to provide transaction details in connection to virtual digital assets (VDAs). Moreover, she put forward that the definition of VDA which was also amended to include any items using crypto like technology.

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Virtual Digital Assets (VDAs)

Virtual Digital Asset (VDA) means digital representation of an item that has value which can be digitally traded,  transferred, or used for payment.

The new Income Tax Bill defines VDA as, “any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, called by any name, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically.”

Section 285BAA

The insertion of section 285BAA in the Income Tax Act, making it compulsory to provide information of crypto-asset.

“Sub-section (1) of section 285BAA of the Act states any person, being a reporting entity, as may be prescribed, in respect of crypto asset, shall furnish information in respect of a transaction in such crypto asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as may be prescribed,” it read.

Besides, the government has expanded the definition of VDA by amending the clause (47A) of section 2 to insert sub-clause (d) that handles crypto-assets that depend on “cryptographic security and distributed ledger technology”.

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Crypto Tax

However, the current Budget did not make any modifications to the applicable tax rates on the cryptocurrencies like Bitcoin (BTC), Ethereum (ETH). The government continued with the 30% tax on crypto income and the 1% Tax Deducted at Source (TDS) on crypto transactions, both introduced in July 2022.