Are you interested in buying real estate in the Metaverse in the future? Currently, the Indian government has already taxed it as part of the budget for 2022-23. The transfer of digital and virtual assets will be taxed at 30%, according to Finance Minister Nirmala Sitharaman.
“For taxation of virtual digital assets, I propose that any income derived from the transfer of any virtual digital asset will be taxed at 30 percent. Expenses and allowances shall not be deducted when computing such income except for acquisition costs,” said Sitharaman.
Assets taxed, losses ignored
Moreover, the government also seems to have drawn a line between offline and online assets. “Further, loss from transfer of virtual digital assets cannot be set off against any other income,” she added.
It means that if a large chunk of cloud storage is bought, or a lot of fiat currency is used to buy cryptocurrencies (instead of mining it), or even if over-enthusiastic gamers spend large amounts of money to buy virtual accessories like ‘diamonds or arms’ and more such, they would be taxed. Also if your virtual asset loses value, it’s entirely ‘your’ loss.
An eye in the cloud
The government which is yet to provide a clear view on cryptocurrencies seems to be taking it seriously. “There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” said Sitharaman.
The government has realised that its population is spending a lot of time and money virtually. To control the extensive flow of money into virtual assets – which do not provide a multiplier effect on the economy – the finance minister is taxing them to make sure, these assets give back as much to the economy as much they take from it.
Giving back to the economy
In an offline economy, every asset like real estate or even a packet of chips provides back to the cycle of the economy in many ways – in GST and corporate taxes and much more. However, virtual assets which need not necessarily be created in India, provide no such income to the government. This tax is a way to alter the balance of how the country makes money, now and in the future. So, it intends to keep a note of all such transactions.
“Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient,” Sitharaman said.
In the near future, this flow of money into virtual assets might prove to be a drainer than black money where money leaves the country. With this tax, the government hopes to stop money from going up in the air.
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