Answer: The income tax department is keen to track virtual digital assets such as cryptocurrency and non-fungible tokens (NFT). India’s tax authority has said that income from the transfer of such assets will be taxed at 30% in line with the tax rate on capital gains.
While presenting the Union Budget 2021-22, finance minister Nirmala Sitharaman had said that income from the transfer of virtual currencies would be taxed at 30%.
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The tax department has now detailed the new rules for taxing cryptocurrency and NFT transactions. It says that no deduction, except the cost of acquisition (of digital assets), shall be allowed while reporting income from the transfer of digital assets. Loss from digital assets cannot be set off against any other income and carried forward.
Q: What are cryptocurrencies?
Cryptocurrencies (also known as virtual currencies) are digital assets used as a medium of exchange that use cryptography to secure their transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrency generally operates independently of a central bank or other authority. Cryptocurrency is neither legal tender nor currency according to Indian law.