New sections on Virtual Digital Assets under the income tax
The Hon’ble Finance Minister Nirmala Sitharaman proposed the provisions regarding “Virtual Digital Assets and their taxability” in the Union Budget 2022-23.
Section 2(47A): Meaning of Virtual Digital Assets (As presented in the Finance Bill, 2022)
(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, 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;
(b) a non-fungible token or any other token of similar nature, by whatever name called;
(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:
Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of virtual digital asset subject to such conditions as may be specified therein.
Explanation.––For the purposes of this clause,––
(a) “non-fungible token” means such digital asset as the Central Government may, by notification in the Official Gazette, specify;
(b) the expressions “currency”, “foreign currency” and “Indian currency” shall have the same meanings as respectively assigned to them in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act, 1999.’.
Section 115BBH: Tax on income from the virtual digital assets
Applicable Tax Rate @ 30%
Where the total income of an assessee includes any income from the transfer of any virtual digital asset, the income-tax payable shall be the aggregate of––
(a) the amount of income-tax calculated on the income from transfer of such virtual digital asset at the rate of thirty per cent.; and
(b) the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a).
For Example:
| Particulars | Amount |
| Total Income (Including income from Virtual Digital Asset of Rs. 2,00,000) | 10,00,000 |
| Less: Income from Virtual Digital Asset | 2,00,000 |
| Income Chargeable to tax at a normal rate | 8,00,000 |
| Tax on Virtual Digital Asset @ 30% | 60,000 |
| Tax on Other income (as per slab rate assuming the taxpayer as an individual not opted for new tax regime u/s 115bac) 2.5 L : NIL 2.5 L – 5 L (5%) : 12,500 5 L – 8 L (20%) : 60,000 | 72,500 |
| Total Tax (60,000 + 72,500) | 1,32,500 |
| Add: Cess @ 4% of 1,32,500 | 5,300 |
| Total Tax Liability | 1,37,800 |
Important Points:
- No deduction in respect of any expenditure (other than cost of acquisition) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income from virtual digital asset;
(No Loss can be set off against the income from Virtual Digital Asset)
and - No set off of loss from transfer of the virtual digital asset computed under clause (a) of sub-section (1) shall be allowed against income computed under any other provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years.
(Loss of Virtual Digital Asset cannot be set off or carried forward)
Section 194S: Payment on transfer of virtual digital asset
Also Read: Union Budget 2022 amendments proposed in the Income Tax
Memorandum Explaining the Provisions in the Financial Bill
Read More on Budget 2022
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