Budget 2022 on Virtual Digital Asset: You have to PAY taxes even if gifted!

Budget 2022: Union Finance Minister Nirmala Sitharaman has announced a big update regarding the Virtual Digital Asset. All virtual digital assets are now taxable, as part of the latest update. "Any income from transfer of digital asset will be taxed at 30 percent, announced the Finance Minister Nirmala Sitharaman on Tuesday's budget.

“I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 percent. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except cost of acquisition," said the FM.

Taxes on Virtual Digital Asset

Some other key updates regarding the Virtual Digital Asset

- Loss can't be set-off against any other gain.

- Gain from transfer of virtual digital asset is non-deductible.

- Gift of virtual digital asset will be taxable too.

Hence, even if someone gifts you a virtual digital asset, you have to pay the tax on it. However, any earnings from transfer of virtual digit asset is non-deductible.

Saraswathi Kasturirangan, Partner, Deloitte India, explains, "Taxation of virtual digital assets - at 30 percent. No deduction other than cost of acquisition. No set off permitted against other income. Tax withholding to be triggered on sale at 1percent beyond certain threshold. Deduction for employer contribution to NPS increased from 10 % to 14% for state govt employees on par with central govt employees. Not extended to non- govt employees."

Other than that, the Finance Minister also confirmed that the Central Bank will now introduce a new digital currency in India, called Digital Rupee. This will be based on the blockchain technology, similar to the underlying tech for Bitcoin and other forms of cryptocurrency.

"Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system," Nirmala Sitharaman said on Tuesday while presenting the federal budget.