Crypto mining cost not to be allowed as deduction under I-T Act Govt
New Delhi Mar 21 PTI Infrastructure cost incurred in the mining of cryptocurrencies or any virtual digital assets will not be allowed as deduction under the Income Tax Act Minister of State for Finance Pankaj Chaudhary said on MondayIn a written reply to the Lok Sabha Chaudhary said the government will come out with a definition of Virtual Digital Assets VDA with a view to levy 30 per cent tax on income from the transfer of such assetsAlso loss from the transfer of VDA will not be allowed to be set off against the income arising from the transfer of another VDA Chaudhary saidHe also said that currently cryptocurrencies are unregulated in IndiaThe 2022-23 Budget has brought in clarity concerning the levy of income tax on crypto assets From April 1 a 30 per cent I-T plus cess and surcharges will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactionsThe minister said that while computing the income from transfer of VDA no deduction in respect of any expenditure other than the cost of acquisition or allowance is allowedThe Finance Bill also proposes to define VDA If any asset falls within the proposed definition such virtual asset will be considered as VDA for the purposes of the Act and other provisions of the Act will apply accordingly he saidFurther he said infrastructure costs incurred in the mining of VDA eg crypto assets 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 under the I-T ActNangia Andersen LLP Partner Sandeep Jhunjhunwala said since intra-head adjustment of losses ie set-off of loss arising from one VDA with the income from another VDA would not be permitted such losses would be a sunk cost for the investors causing a double whammy paying taxes on gains and no offset of lossesThis would lead to a situation where losses say on account of transaction in altcoins one VDA class would not be permitted for set-off against gains on another VDA class say any other programmable token or bitcoin he saidDisallowance of infrastructure cost incurred in mining cryptocurrencies costs as a permissible revenue expenditure would further increase the cost of mining these assets Jhunjhunwala addedRohinton Sidhwa Partner Deloitte India said the mining expense disallowance is unlikely to impact the majority of traders however the prevention of offset between different cryptos will probably negatively impact many tradersThe Budget 2022-23 also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10000 in a year and taxation of such gifts in the hands of the recipient The threshold limit for TDS would be Rs 50000 a year for specified persons which include individualsHUFs who are required to get their accounts audited under the I-T ActThe provisions related to 1 per cent TDS will come into effect from July 1 2022 while the gains will be taxed effective April 1Separately the government is working on a legislation to regulate cryptocurrencies but no draft has yet been released publicly PTI JD CS MBI RAM
New Delhi Mar 21 PTI Infrastructure cost incurred in the mining of cryptocurrencies or any virtual digital assets will not be allowed as deduction under the Income Tax Act Minister of State for Finance Pankaj Chaudhary said on MondayIn a written reply to the Lok Sabha Chaudhary said the government will come out with a definition of Virtual Digital Assets VDA with a view to levy 30 per cent tax on income from the transfer of such assetsAlso loss from the transfer of VDA will not be allowed to be set off against the income arising from the transfer of another VDA Chaudhary saidHe also said that currently cryptocurrencies are unregulated in IndiaThe 2022-23 Budget has brought in clarity concerning the levy of income tax on crypto assets From April 1 a 30 per cent I-T plus cess and surcharges will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactionsThe minister said that while computing the income from transfer of VDA no deduction in respect of any expenditure other than the cost of acquisition or allowance is allowedThe Finance Bill also proposes to define VDA If any asset falls within the proposed definition such virtual asset will be considered as VDA for the purposes of the Act and other provisions of the Act will apply accordingly he saidFurther he said infrastructure costs incurred in the mining of VDA eg crypto assets 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 under the I-T ActNangia Andersen LLP Partner Sandeep Jhunjhunwala said since intra-head adjustment of losses ie set-off of loss arising from one VDA with the income from another VDA would not be permitted such losses would be a sunk cost for the investors causing a double whammy paying taxes on gains and no offset of lossesThis would lead to a situation where losses say on account of transaction in altcoins one VDA class would not be permitted for set-off against gains on another VDA class say any other programmable token or bitcoin he saidDisallowance of infrastructure cost incurred in mining cryptocurrencies costs as a permissible revenue expenditure would further increase the cost of mining these assets Jhunjhunwala addedRohinton Sidhwa Partner Deloitte India said the mining expense disallowance is unlikely to impact the majority of traders however the prevention of offset between different cryptos will probably negatively impact many tradersThe Budget 2022-23 also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10000 in a year and taxation of such gifts in the hands of the recipient The threshold limit for TDS would be Rs 50000 a year for specified persons which include individualsHUFs who are required to get their accounts audited under the I-T ActThe provisions related to 1 per cent TDS will come into effect from July 1 2022 while the gains will be taxed effective April 1Separately the government is working on a legislation to regulate cryptocurrencies but no draft has yet been released publicly PTI JD CS MBI RAM
