Taxation of Virtual Digital Assets – Section 115BBH - Income Tax - Ready Reckoner - Income Tax

Taxation of Virtual Digital Assets Section 115BBH Virtual Digital Assets means - (a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature, by whatever name called; The non-fungible token means such digital assets as may be notified by the central government, vide notification 75/2022 dated 30.06.2022, specifies a token which qualifies to be a virtual digital asset as non-fungible token within the meaning of sub-clause (a) of clause (47A) of section 2 of the Act but shall not include a non-fungible token whose transfer results in transfer of ownership of underlying tangible asset and the transfer of ownership of such underlying tangible asset is legally enforceable. (c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify: Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of virtual digital asset subject to such conditions as may be specified therein. [ Section 2(47A) ] Notes:- NFT shall not include a NFT whose transfer results in transfer of ownership of underlying tangible assets and the transfer of ownership of such underlying tangible asset is legally enforceable. Accordingly , the central government has , vide notification no. 74/2022 dated 30.06.2022, following virtual digital assets w hich shall be excluded from the definition of virtual digital asset:- Gift Card or vouchers , being a record that may be used to obtain goods or services or a discount on goods or services; Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services; Subscription to websites or platforms or application. Tax on Virtual Digital Assets [ Section 115BBH inserted AY 2023-24]- As per Section 115BBH @30% on Income on transfer of Virtual Digital Asset Tax payable on income from the transfer of any VDA - Where the total income of an assessee includes any income from the transfer of any virtual digital asset, notwithstanding anything contained in any other provision of this Act, the income-tax payable shall be the aggregate of,- the amount of income-tax calculated on the income from transfer of such virtual digital asset @30%.; and the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a). Notwithstanding anything contained in any other provision of this Act,- No deduction allowed except cost of acquisition - no deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income referred to in clause (a) section 115BBH(1) ; Set off or carry forward of loss from transfer of virtual digital assets not to be allowed - No set off of loss from transfer of the virtual digital asset computed under clause (a) of section 115BBH(1) shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years. The word transfer as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not. Taxability of receipt of virtual digital assets as gift or for inadequate consideration [ Section 56(2)(x) ] where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,- any property, other than immovable property,- (a) without consideration - the aggregate fair market value of which exceeds ₹ 50,000/-, the whole of the aggregate fair market value of such property; (b) For inadequate consideration - for a consideration which is less than the aggregate fair market value of the property by an amount exceeding ₹ 50,000/-, the aggregate fair market value of such property as exceeds such consideration. [ Section 56(2)(x)(c) ] Explanation .-For the purposes of this clause,- (b) the expression property shall have the same meaning as assigned to it in clause (d) of the Explanation to clause (vii) and shall include virtual digital asset. Tax deduction at source TDS Under section 194S @1% TDS to be deducted of any sum by way of consideration for transfer of a Virtual Digital Asset . [ For more details refer this Link ]