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The Finance Ministry has proposed amendments in the Finance Bill 2022 to prescribe that mining cost not to be treated as the cost of acquisition of the Virtual Digital Asset (VDA) for the deduction, not setting off a loss with a gain of others and “transfer” in relation to the capital assets will include VDA. All these have dashed the hope of the crypto industry which was expecting some relief.
All these proposals are part of official amendments uploaded on the portal of MPs, a copy of which has been seen by BusinessLine. Finance Minister Nirmala Sitharaman will move the offical amendments at the the time of consideration and passage of the Finance Bill 2022 on Friday.
The Finance Bill has used the word ‘Virtual Digital Asset’ for cryptocurrencies. Once the discussion on Finance Bill is over, these official amendments will become part of the Bill. Parliament is expected to approve the Finance Bill 2022 by early next week and then will be sent for assent by the President.
Seeking relief
Post the presentation of Union Budget, crypto players made representations for relief on 30 per cent taxation on income received through the transfer of VDA, tax on the recipient of VDA as gift and Tax Deducted at Source (TDS) on the transaction of VDA. However, with the proposed official amendments, their hope for relief through legislative changes has ended.
Amendment has been proposed in a provision of the Finance Bill 2022 which said no deduction in respect of any expenditure (other than the cost of acquisition) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act. Now ‘other than cost of acquisition’ will be replaced by ‘other than cost of acquisition, if any.’ This means mining infrastructure costs will not be included in the cost of acquisition to be claimed as a deduction.
‘Transfer’ and TDS
Another proposed provision says the word ‘transfer’ as defined under the Income Tax Act, will apply to any VDAs (, whether capital asset or not. This means TDS is to be levied on the entire transaction value.
Last week, Minister of State in the Finance Ministry, Pankaj Chaudhary said in a written reply that Loss from sale of one crypto will not be set off against the gain from the sale of another crypto. Further, while computing the income from such a transfer, no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed.
“As per the proposed provisions of Section 115 BBH, infrastructure costs incurred in the mining of VDA will not be treated as cost of acquisition as the same will be in the nature of capital expenditure which is not allowable as a deduction as per the provisions of the Act,” the minister said. He also clarified that as on date, cryptocurrencies are unregulated in India.
Demands for grants
Meanwhile, on Thursday all remaining demands for grants out of 102 included in the Union Budget were gullationed. Lok Sabha has already approved demands for grans related with key Ministries such as Railway, Defence, Civil Aviation, Surface Transport etc . Also, Lok Sabha approved Appropriation Bill to authorise payment and appropriation of certain sums from and out of the Consolidated Fund of India for the services of the financial year 2022-23. Now, all these will be sent to Rajya Sabha which is expected to return by early next week. This will be followed by assent from the President.
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