Page 17 - Union Budget, 2022

Union Budget, 2022

Ensuring Tax Levy and Reporting of Income

Taxation of Virtual Digital Assets
• New Sec 115BBH is proposed to be introduced to bring into taxation, net income arising from transfer
of any virtual digital asset at 30%, without deduction of any expenditure or allowance, except cost of
acquisition without indexation. Further, set-off and carry forward of losses against the same income or
any other income is not permissible.
• New Clause 47A proposed to be inserted in Sec 2 defines “Virtual digital asset”, to be any digitally
represented information or code or number or token generated through cryptography or “any means”.
Any Indian or foreign currency is specifically excluded. Further, Non-fungible Tokens (NFTs) and any
other digital assets might be taxed or exempted subject to specification by the CG.
• Further, Sec 56(2)(x) is also proposed to be amended so as to tax, FMV of any virtual digital asset received
without or for inadequate consideration (whose FMV exceeds Rs.50,000).
AY 2023-24 and subsequent AYs

• The long-term ambiguity which hovered around the tax framework of cryptocurrency has now been
addressed, bringing into taxation the returns earned by around 1.7 million Indians trading in digital assets

and strongly communicating that India joins few other countries in its distinct discomfort towards
cryptocurrency.
• Since the definition excludes foreign currency, investment in any cryptocurrency recognised by any foreign
country as a legal tender (such as El Salvador) will not be brought into the purview of the proposed
Section.
• As the definition of virtual digital asset is wide, there remains an ambiguity whether reward points on
cards, air miles by flight companies, etc. would come under the purview or not.
• Further, the mode of taxation on transfer of virtual digital assets and receipt without/ for inadequate
consideration of virtual digital assets before 01.04.2022 is not clarified. In this scenario, tax on income
from transfer of digital assets, receipt of digital assets without consideration, before 01.04.2022, shall be
computed based on the existing provisions of the Act. In other words, whether income from transfer
before 01.04.2022 be taxed as “Capital gains” or “Profits or Gains from Business or Profession” shall be
dependent on the facts of the case, which shall be prone to litigations.

Annual real growth in demand side of GDP and its components (per cent)

Studies

• Latest advance estimates suggest full recovery of all components on the demand side in
Inference 2021-22 except for private consumption.
• When compared to pre-pandemic levels, recovery is most significant in exports followed
by Government consumption and gross fixed capital formation. However, an equally
strong recovery was seen in imports.

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