The Government has put forth a clarification on the definition of Virtual Digital Assets (VDA) that excludes certain transactions, in a much-awaited move.
There has been a lot of confusion around the implementation of taxation rules for virtual digital assets such as NFTs and cryptocurrency.
The existing definition of virtual digital assets was broad in its application, leading many to believe that it would bring many assets having nothing to do with crypto or blockchains under the purview of VDA taxation.
The Central Board of Direct Taxes (CBDT) has excluded the following items from the definition of virtual digital assets via a notification dated 30th June 2022′
According to the new definition these include gift cards, vouchers, discount coupons etc. Promotional program for the purchase of or discount on goods or services such as travel miles, rebate and online shopping loyalty card schemes have been excluded.
Digital subscriptions to websites have also been excluded under the new definition.
The Rules Don’t Apply To ‘Some’ NFTs
The 30% tax on income and 1% TDS rules will apply on Non-Fungible Tokens (NFTs).
However NFTs whose transfer results in the transfer of ownership of underlying tangible assets which is legally enforceable would not be considered as VDAs for taxation
‘Central Government hereby 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 nonfungible 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,’ the CBDT said in another notification.
According to the above notification, NFTs of tangible assets, like land records, would not be considered virtual digital assets.
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius