Context:
In a significant move to tighten compliance, the Income Tax Department has issued notices to thousands of taxpayers who failed to disclose income from cryptocurrency or Virtual Digital Asset (VDA) transactions.
What is Virtual Digital Asset (VDA)?
According to the Finance Act 2022 (India), a Virtual Digital Asset (VDA) is defined as:
- Any form of digital representation of value that is generated using cryptographic methods.
- A store of value or a unit of exchange, transferred electronically.
- Includes cryptocurrencies like Bitcoin, Ethereum, and stablecoins.
- Includes NFTs (Non-Fungible Tokens), which represent ownership of unique digital or physical assets.
- Excludes digital representations of traditional currencies regulated by governments (like CBDCs – Central Bank Digital Currencies).
Cryptocurrency (or virtual currency)
Crypto assets are assets issued or transferred using distributed ledger technology (DLT) or blockchain technology. They are a wide range of digital instruments that can represent value or ownership. Crypto assets include cryptocurrencies.
Cryptocurrency (or virtual currency) is likely the most well-known type of crypto asset. Cryptocurrency is a digital currency or medium of exchange. It can be used To exchange for products or services, like fiat currency (such as Canadian dollars or US dollars)
Background
- Growing Scrutiny of Crypto
- The move follows increased monitoring of crypto exchanges and wallet transactions.
- VDA income is taxable under Section 115BBH of the Income Tax Act, effective from April 2022.
- It attracts a flat 30% tax rate without deductions (except cost of acquisition) and 1% TDS under Section 194S.
