Cryptocurrencies, NFTs, and the Metaverse are terms that you may not yet be familiar with, understand, or have had any personal experience. With so much coverage of these cutting-edge technologies, the rush to invest, and the associated worries about a potential ban in India, it was only a matter of time before the taxman joined the party to make sure that the correct taxes were paid.
Cryptocurrency is known as a Virtual Digital Asset, or VDA, in India. The finance minister Nirmala Sitharaman unveiled the provisions for taxation on virtual currency, non-fungible tokens, and other VDAs in Budget 2022. (Virtual Digital Asset). They also included provisions for tax on giving gifts of cryptocurrency, NFTs, etc. According to the Income Tax Act, gifts of cryptocurrencies, NFTs, etc. are taxable in the hands of the recipient.
Despite being around since 2015, NFTs didn’t really take off until 2021. India has 11 NFT companies, which is the third-highest number worldwide, according to new research from NFT Club, a technology-focused resource platform. Meanwhile, five of the top 10 most well-funded NFT companies in the world are located in the US, which has the most of them (91).
Will NFT be lifted from Income Tax Act In India?
In India, there are ongoing concerns about how the 30% tax on virtual digital assets, which would include NFTs, will affect consumer sentiment in India. Industry participants do, however, believe that the NFT market in India is expanding and that consumers are becoming more aware of it. NFTs continue to cause a lot of people to be perplexed, despite some very outspoken enthusiasm from groups of tech and art enthusiasts. This reluctance is only normal because it is challenging.
As a matter of fact, particularly in India NFTs sector needs more recognition among the masses. Recently Indian film stars like Amitabh Bachchan, Salman Khan, and Rajnikanth have introduced their NFTs. In addition to this Indian Cricket team captain Rohit Sharma have also introduced their NFTs to give opportunity to admirers to own a genuine representation of their work and legacy. Eventually amendment is directly proportional to adoption. NFTs can be lifited from Income tax act but that all depend on the adoption of NFTs.
Current Laws on NFTs
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 and any other token of a similar nature were included in the amended law’s definition of crypto assets. Additionally, it was informed that any income derived from the sale or transfer of cryptocurrency assets or NFT will be subject to a 30% tax rate. In addition, no deductions are permitted besides acquisition costs. Every time there is a sale, TDS at the rate of 1% is also applicable.