Understanding the laws on Virtual Digital Assets.
Recently there’s been a phenomenal increase in transactions in crypto currencies.
However, cryptocurrencies like Bitcoin, Ethereum, and all other alt tokens are unregulated in India.
But while the Government was mulling a ban on cryptocurrency last year, this year it made it to the Union Budget 2022–2023. (Contrary to the Government’s stance of banning cryptocurrency last year, this year it made it to the Union Budget 2022–2023.)
Let’s find out what the Union Budget of 2022–23 has in store for crypto currency and its investors.
Well, to begin with, the Union Budget of 2022–23 classifies every digital asset including cryptos and NFTs as ‘Virtual Digital Assets’ or simply called VDA.
What are Virtual Digital Assets?
As the name suggests, digital assets which are tangible having no physical presence are called Virtual Digital Assets.
The Finance Bill 2022 vide Bill №18 of 2022 brought an amendment to the Income Tax Act, 1961 by inserting a new clause to Section 2 as 47A defining VDAs.
These do not include:
- Digital gold; or
- Central Bank Digital Currency (CBDC), or any other assets.
Only those digital assets which are transacted on a blockchain, such as NFTs, crypto, and other virtual assets are called Virtual Digital Assets.
These VDAs can be traded digitally, used for transfers between parties, and for investment purposes.
What comes under the purview of Virtual Digital Assets?
Any cryptocurrency, by whatever name called would be considered a VDA if it:
- is in the form of information, code, numbers, or tokens;
- is generated through cryptographic means or otherwise;
- acts as a digital representation of value;
- has some inherent value; and
- allows for the storage and transfer of its units or tokens.
VDAs are not only limited to an investment scheme but can also be stored and transferred or traded electronically.
A non-fungible token (NFT) or any other token of similar nature are all included in the class of virtual digital assets.
To put it simply, all tokens and NFTs based on blockchain technology regardless of any financial activity being involved would be considered VDA.
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