Minister of State for Finance Pankaj Choudhary said in Lok Sabha, “The infrastructure cost incurred in mining of VDA will not be considered as cost of acquisition as it will be in the nature of capital expenditure.”
Responding to a question by Congress member Karti Chidambaram, the minister also said that the loss arising from transfer of VDA will not be allowed to be set off against the income from transfer of another VDA. “No deduction will be allowed in respect of any expenditure other than the cost of acquisition,” he said.
The cryptocurrency industry stated that the decision to decline offsets between various crypto and mining expenses is regressive and would discourage investor participation.
The budget for 2022-23 proposes to impose an income tax of 30% on crypto assets from April 1.
Chowdhury said, “The (Finance) Bill also proposes to define VDA. If any property falls within the proposed definition, then such virtual asset shall be deemed to be VDA for the purposes of the Act and other provisions of the Act shall apply accordingly.” . ”
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He said the government would come up with a vision to levy 30% tax on the income from transfer of such assets with the definition of virtual digital assets.
Industry review seeks:
The cryptocurrency industry urged the government to review its decision as it could move investors from authorized platforms to the gray market.
“Treating the profit and loss of each market pair separately will discourage crypto participation and accelerate the growth of the industry,” said WazirX CEO Nischal Shetty. “This is very unfortunate, and we urge the government to reconsider it.”
“This is detrimental to India’s crypto industry and the millions of people investing in this emerging asset class,” said Ashish Singhal, co-founder and CEO of CoinSwitch.
He added that it is feared that the lack of provision for damages will lead to users moving from KYC-compliant exchanges and platforms to underground peer-to-peer gray markets, defeating the purpose of the tax.
“The budget recognized virtual digital assets as an emerging asset class. Therefore, a natural course of action would have been to progressively bring regulations in line with other asset classes,” Singhal said.
He said the latest clarification is a step back. “Had such a regressive provision applied to equities, it would have discouraged retail investors from participating.”
Rohinton Sidhwa, Partner, Deloitte India, said, “This is a continuing effort to isolate and discourage crypto-related activities in India.”
He added that although the rejection of mining spend was unlikely to affect most traders, the prevention of offsets between different cryptos would probably negatively affect many traders, he said.
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