Loss in one crypto asset can’t be set off against another
NEW DELHI: Investors would not be allowed to set off loss in one crypto asset against another, the government said on Monday. Mining infrastructure would also not be eligible to be deducted as the cost of acquisition, it said.
This is a significant blow to people who invest in crypto as taxation provisions such as setting off losses and the cost of acquisition in other asset classes such as stocks, mutual funds, or gold help investors lower tax incidence.
Finance minister Nirmala Sitharaman had on February 1 introduced a 30% tax on income from the transfer of virtual digital assets (VDA) or crypto assets. The tax proposal covered all emerging digital assets, such as non-fungible tokens, assets in metaverse, digital currencies and tokens. Along with the 30% tax, the Union budget 2022-23 also proposed a 1% deduction of tax at source on transfer of such assets.
Opinions of tax experts were split on whether investors could set off losses in one crypto against another crypto asset.
“According to the provisions of the proposed section 115BBH to the Income-tax Act, 1961, loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA,” minister of state for finance Pankaj Chaudhary said in the Lok Sabha on Monday, in response to queries raised by Lok Sabha member Karti Chidambaram on the status crypto currency in India.
“The major issue in crypto taxes is the inability to offset losses even in different crypto trades. Implementing a single tax for single crypto rule will be a massive blow to the nascent crypto industry in India,” said Shivam Thakral, chief executive officer of BuyUcoin.
Crypto assets were unregulated in India, Chaudhary said in the Lok Sabha. There was speculation that the crypto tax proposals had effectively legalized such assets in the country.