Loss in one crypto asset can’t be set off against another, clarifies govt

Currently, Cryptocurrencies are unregulated in India. The Finance Bill, 2022 (the Bill) has proposed to insert section 115BBH to the Income-tax Act, 1961 (the Act) to provide for taxation of income from transfer of virtual digital assets (VDA). As per the proposed section, any income from transfer of VDA shall be taxed at the rate of 30%. Further, while computing the income from transfer of VDA, no deduction in respect of any expenditure (other than cost of acquisition) or allowance is allowed. The Bill also proposes to define VDA.

If any asset falls within the proposed definition, such virtual asset will be considered as VDA for the purposes of the Act and other provisions of the Act will apply accordingly. As per the proposed provisions of section 115BBH, infrastructure costs incurred in mining of VDA (eg. crypto assets) will not be treated as cost of acquisition as the same will be in the nature of capital expenditure which is not allowable as deduction as per the provisions of the Act.

Mr. Pankaj Chaudhary, Minister of State for Finance responds to questions on taxation of cryptocurrency raised by Mr. Karti P. Chidambaram, MP; MoS clarifies that no deduction of any expenditure or allowance, apart from cost of acquisition, will be allowed while computing the income from transfer of virtual digital assets as per the provisions of Finance Bill, 2022; He further clarifies that infrastructure cost will not be treated as cost of acquisition for mining crypto assets and it shall be considered as capital expenditure not allowable as deduction; Lastly, the Minister states that loss from transfer of a virtual digital asset shall not be allowed for set off against income arising from another virtual digital asset.

* 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.