The new taxation regime for virtual digital assets introduces greater clarity for their investors, and would help the larger ecosystem, Central Board of Direct Taxes (CBDT) Chairperson J.B. Mohapatra said in an interview with The Hindu’s Vikas Dhoot. He also urged people to read the tax rules and fine print before investing in such assets. Edited excerpts:
The tax on crypto assets without granting them full legitimacy is unusual. Will it kick in with retrospective effect?
That the legislation will kick in from April 1 doesn't mean transactions before that will be tax-free. Nobody, no investor who we have seen or investigated, has any dispute with regard to the taxability of the surplus coming from digital assets’ trade. We all agree it has to be taxed, but there was some confusion in what way it will be taxed as there is no guidance or legislation available. Sometimes, it is shown as capital gains, sometimes as income from business, sometimes as income from other sources. So this legislation will clear all doubts that it will be under a special chapter with a special rate of tax for the virtual digital asset defined in Section 247A. The TDS (Tax Deduction at Source) provisions (to pay 0.1% as tax for every transaction) are amply clear. If there are any reservations or issues on which we agree that the legislation need to be straightened out, of course, we will work on that. But the virtual digital asset tax brought in would help the larger ecosystem also remain unaffected by the supposed opacity of that particular sector. So it will open up that market for regulatory compliances.
