Making a loss in cryptocurrency investing or trading from next month would result in further disappointment as you won’t be able to set off your losses against gains from another crypto.
The Government’s flat 30% tax rate on income from transfer of crypto and other virtual digital currencies would come into effect from April 1, 2022. Finance Minister Nirmala Sitharaman had announced this proposal in Budget Speech 2022.
Until yesterday, crypto and tax experts were of the view that only aggregate gains (minus losses) from all crypto investments would be subject to tax. However, the Government on Monday (March 21, 2022) clarified in the Parliament that losses from virtual digital assets cannot be set off against gains one may make from other such assets. In other words, crypto investors and traders would have to pay flat 30% tax on income while losses would not provide any tax benefit.
“As per the provisions of the proposed section 115BBH to the Income-tax Act 1961 (the Act), loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA,” Union Minister of State for Finance Pankaj Chaudhary said in a written reply to a query in the Lok Sabha.
Crypto investors, traders and experts are disappointed with the clarification as many fear this would lead to the death of emerging blockchain industry in India.
“While profits from crypto trading will be taxed at 30%, losses cannot be set off against other losses or be carried forward. This is something that is more depressing. Crypto is an asset class and an investment product which should be treated as other asset classes,” Neha Nagar, CEO & Founder, TaxationHelp.in, said.
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Ashish Singhal, Co-founder & CEO, CoinSwitch, said, “This is detrimental for India’s crypto industry and the millions who have invested in this emerging asset class. We fear the lack of provision to offset losses will drive away users from KYC-compliant exchanges and platforms to the underground peer-to-peer grey market, which would defeat the purpose of the tax.”