Digital Assets or the minimal coined term cryptocurrency (“or Crypto”)has emerged as the new age digital asset with features of the medium of exchange and acceptability as of a Legal tender in certain states cross borders. This Unregularized digital medium of trade has been drawing attention since 2019-2020, 2020-2021 when its flag bearer ‘Bitcoin’ showed a sudden colossal rise from trading at INR 2,50,000/- in January 2019 to trading at 44,82,000/- in April 2021 contemplating a glittery rise of 1,792 % (Approximately) with Indian investment of approximate 1,000,00,00,000 (One Thousand Crore) by April 2021.
With the increasing investments in Digital Assets stability and safety, both legal and financial, was the topic of concern for the government and Indian investors, and to clear the haze over the future of the Digital Assets, the Regularisation of Cryptocurrency Bill 2021 was to be introduced in the winter session of the Parliament with the zenith of imposing a ban on the private cryptocurrencies which was later not introduced as the bill required plenty of rework to be done.
Digital Assets or Cryptocurrency being an unregularized asset with heavy investments of the citizens of India, the budget session was tended to be a crucial event. The Hon’ble Finance Minister of India, Smt. Nirmala Sitharaman, while addressing the nation in her budget speech has announced the levy of tax on income derived from the transfer of virtual assets or digital currencies @30% including 1% Tax Deducted at Source (TDS) on such transfer of the virtual assets with no deduction and exemption in respect of expenditure or allowances while computing the income earned from transfer of digital assets apart from the cost of acquisition. Further, loss from the transfer of such assets cannot be set off against any other income or carried forward over the years.
Insertion of Section 115BBH and 194S in the proposed finance bill effective from 1st April 2023 are the drivers of the taxability of the Digital Assets. There has been a loud noise regarding the transferability of the income derivation from NFT or ‘Non-Fungible Tokens’ and the question after the budget speech regarding the taxability of NFT was also raised with speculation of non-taxability of the NFT being a form of digital art and not any form of currency or exchange mechanism. The muddle of speculation stating the non-taxability ofthe NFT can be clear after analyzing the explanation (a) to the definition of Virtual Digital Assets inserted vide Section 47A which states that
“non-fungible token” means such digital asset as the Central Government may, bynotification in the Official Gazette, specify”
From the insertion of Section 194S and 115BH technically giving the primary recognition to the cryptocurrencies/digital assets the ambiguity of putting complete ban on the Digital Assets has been initially clear with the averment that the stake of government regarding banning the Digital Assets/Crypto is clear and the government is in no disposition to put complete ban whereas the government is all set to encash the opportunity by implementing tax on the transfer of the digital assets which in the case of NFT will be on the 100% income on transfer of the Created NFT being non fungible in nature.
In our opinion after deeply analyzing the words of our Hon’ble Finance Minister, India is all set to become the global hub for Digital Assets. Further India is also planning to introduce their own digital asset/currencies and using their own blockchain for the said currencies principally regulated by the Reserve Bank of India (RBI). Whereas considering the politically imbalance and the soft sentiments, the ambiguity over the future of the crypto is still not very clear as government may by the official gazette exclude any digital asset from the definition of the “virtual digital assets” winding the acceptability and the recognition to the digital assets in India. Welcoming the move of the government the present regime shall be considered as the ray of hope for the cryto investors and safety of their investments, as this is a bridge which shall soon be completed with the destination to regularise the Digital Assets with a legal methodology to create a fungible market for the crypto seekers.
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