Bad news for investors those who are investing in Cryptocurrencies. As Cryptocurrency investors will not be allowed to offset gains from one cryptocurrency for losses in another cryptocurrency.
The government has proposed amendments to the Finance Bill 2022 to clarify the calculation of profit and loss on investments made in Cryptocurrency.
In the amendment proposal, the tax provision on investment in cryptocurrencies has been tightened, making it clear that the loss arising from investment in any virtual digital asset will not be allowed to be offset by the gain from any other virtual digital asset.
We explain this to you through an example, suppose an investor has invested in both bitcoin and Ethereum cryptocurrencies. And if he makes a profit of Rs 1 lakh by investing in bitcoin and a loss of Rs 1 lakh by investing in Ethereum, the investor will still have to pay tax at the rate of 30 per cent on the profit earned by investing Rs 1 lakh in bitcoin.
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Due to this, he will not be able to compensate for the loss in Ethereum. There is a provision to adjust the profit loss arising from investment in property, shares. But cryptocurrencies have been kept out of this provision.
This question was asked to the Finance Minister during the Question Hour in the Lok Sabha on Monday, in response to which Minister of State for Finance Pankaj Choudhary said that as per the provisions of the proposed section 115BBH of Income Tax 1961, the loss due to transfer of VDA (Virtual Digital Assets) can be transferred to another The set-off will not be allowed against the income arising out of transfer of VDA.
In response to another question, he said that infrastructure costs in cryptocurrencies, for example, computers and electricity, cannot be deducted from income as it would fall under the category of capital expenditure. Deduction of the cost of acquisition of cryptocurrency is allowed under section 115BBH.
On February 1, 2022, Finance Minister Nirmala Sitharaman, while presenting the budget, announced the imposition of a 30 per cent capital gains tax on profits from cryptocurrencies with effect from April 1, 2022.