New terms like cryptocurrencies, NFTs, and the Metaverse can be confusing and intimidating. With all the media coverage of these cutting-edge technologies, there is a lot of pressure to invest quickly. And with worries about a potential ban on cryptocurrencies in India, people are wondering if they will have to pay taxes on their investments.
In India, cryptocurrency is referred to as a Virtual Digital Asset (VDA). In Budget 2022, finance minister Nirmala Sitharaman unveiled the taxation provision for VDAs, non-fungible tokens (NFTs), and other virtual assets. This also included provisions for gifts of cryptocurrencies and NFTs, which are taxable according to the Income Tax Act.
NFT Club, a technology-focused resource platform, conducted new research that found NFTs didn’t gain much traction until 2015. Although 91 out of the world’s top 10 most well-funded companies are located in the United States, India holds third place with 11 NFT companies.
The ongoing debate about the 30% tax on digital assets in India, including NFTs, has caused many people to be hesitant about investing in this new technology. However, industry participants believe that the NFT market is expanding and that consumers are becoming more aware of it. Some people remain perplexed by NFTs, but this reluctance is understandable because the concept can be challenging to wrap your head around.
NFTs have been gaining recognition among the masses, particularly in India. Recently, Indian film stars like Amitabh Bachchan, Salman Khan, and Rajnikanth introduced their NFTs. In addition to this, Indian Cricket team captain Rohit Sharma also introduced his NFT to give admirers an opportunity own a genuine representation of work and legacy. Eventually, amendment is directly proportional to adoption— meaning that if more people adopt NFTs then they can be lifted from Income tax act.
The government had modified section 2(47A) of the Income-tax Act to specifically tax crypto assets and NFTs. The definition of a non-fungible token was included in the amended law’s definition of crypto assets, along with any other tokens of a similar nature. Additionally, it was informed that income derived from the sale or transfer of cryptocurrency assets or NFT will be subject to a 30% tax rate. Furthermore, no deductions are permitted besides acquisition costs; every time there is a sale TDS at the rate 1% is also applicable.