Understanding the ITAT Jodhpur Bench's Ruling on Cryptocurrency Taxation

Recently, the Income-tax Appellate Tribunal (ITAT), Jodhpur bench, made a significant ruling in the case of Raunaq Prakash Jain, a software company employee. The tribunal decided that profits from selling cryptocurrency before the Finance Act, 2022, should be taxed as 'capital gains' rather than 'Income from other sources'. This decision was based on the long-term holding intention and reinvestment in property by Jain, who had held cryptocurrency since the financial year 2015-16 and sold it in FY 2020-21.

The Impact of Budget 2022 on Cryptocurrency Taxation

With the introduction of the Finance Act, 2022, the term 'Virtual Digital Assets' (VDAs) was added to the Income-tax (I-T) Act, clarifying that VDAs are treated as capital assets subject to specific tax rates. However, the new provisions impose a 30% tax on income from the transfer of VDAs, with no deductions allowed except for the cost of acquisition. Moreover, losses from digital assets cannot be set off against any other income, creating a challenging environment for investors.

BCCI's Pre-Budget Memorandum Highlights Concerns

The Bombay Chamber of Commerce and Industry (BCCI) has expressed concerns over the complicated tax framework for VDAs, which has dampened the spirit of overseas investment by global exchanges in India. The BCCI suggests that losses incurred from one kind of VDA should be allowed to set off against gains from another VDA, advocating for a more investor-friendly approach to foster economic growth and prevent tax revenue loss.