new delhi finance minister nirmala sitharaman finally shed light on tax liabilities for virtual assets like cryptocurrencies and said that income from any digital asset will be taxed at 30 percent while presenting the union budget 2022 she said any income from transfer of any virtual digital asset shall be taxed at 30 no deductions and exemptions allowed also loss from transfer of such assets cannot be set off against any other income there will be a 1 tax deductible at source on such transactions and gifts of such assets will also be taxed any income from virtual digital assets is taxable at 30 there will be no deduction with exception of cost of acquisition tds applicable beyond a specified monetary threshold gift of virtual currencies taxable in the hands of recipient said sitharamanin short sitharaman proposed a flat 30 tax on digital asset gains is irrespective of short or longterm holdings in case of losses those cannot be offset against other incomethe recognition of digital assets under income tax is not akin to granting legal statusthis move is not surprising given the finance ministers response to queries raised in the rajya sabha in november 2021 regarding cryptocurrency and nft regulations the bill provides for the definition of virtual digital asset which is wide enough to cover emerging digital assets including nft assets in meta verse digital currencies tokens etc the recognition of digital assets under income tax is not akin to granting legal status said l badri narayanan executive partner lakshmikumaran sridharan attorneysthe bill specifies a rider that no deduction shall be allowed in respect of expenditure incurred on such virtual digital assets except cost of acquisition the new crypto tax seems to be deterrent to the interest of the investors and lot similar to taxation on gambling with a view to monitor crypto transactions a tds 1 shall be levied on the discharge of consideration at the time of transfer of virtual digital asset the bill also provides for taxation on gift of virtual digital assets in the hands of the recipient this will have additional challenges in the operation of global crypto exchanges and privacy concerns for individuals explained narayanan what does this mean for crypto investorsthis implies that if you are holding cryptocurrencies then income derived from such an investment will be taxed at 30 percent any profits generated via the trade of cryptocurrencies would be taxed at 30 including gifts and transfer of virtual assets from one wallet to another owned by different individualsinvestors trading with cryptocurrencies now need to report gains or losses which cannot be offset against any other sort of income the government has set a fixed 30 rate to ensure all investors pay a percentage of their gains to the government in the form of taxes explains abhinav soomaney forensic and crypto expert as well as ceo cryptotaxwhat should investors do most commonly used cryptocurrency tax calculation methods include highest in first out method hifo and last in