NEW DELHI: The government has proposed 39 amendments in the Finance Bill 2022, including clarification on taxation of virtual digital assets (VDAs) or cryptocurrencies. Section 115BBH was introduced in the Finance Bill, 2022 for tax transfer of cryptos. However, experts said that there was an ambiguity with regards to the meaning of transfer.
“The meaning of the phrase ‘transfer’ was unclear as the definition of the term provided under Section 2(47) applied only in relation to capital assets. The amendment now seeks to clear the ambiguity by inserting a sub-section which applied the 2(47) definition to transfer of VDAs irrespective of whether they are construed as capital assets or not,” says Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP.
The finance bill is the list of taxation-related changes in the budget presented by the finance minister. The bill is discussed in both houses of parliament before being passed. This year, the Finance Bill has proposed a 30% tax on the transfer of cryptocurrencies.
The most important amendment, however, is with regards to retrospective disallowance of a deduction for surcharge or Cess with effect from the assessment year 2005-06.
As per the proposal of the Finance Bill, deduction of surcharge or Cess, which has been claimed and allowed to the taxpayer, be deemed to be under-reported income and thus, be subjected to a 50% penalty.
After taxpayers raised concern over the potential impact of the proposal, the government made an amendment saying that pending claims in appeals would not be subject to penalty as they have not been allowed to the taxpayers yet. The amendment also provides an opportunity to taxpayers to seek non-levy of any penalty by making a claim to the assessing officer requesting for re-computation of total income without allowing surcharge or cess as an expenditure.
“The form and timeline for making such a claim will be prescribed in due course of time,” says Sandeep Jhunjhunwala of Nagia Andersen LLP. Another amendment extends the assessment timeline for the AY 2020-21 by 6 months from 31 March 2022 to 30 September 2022 for scrutiny of non-transfer pricing-related cases.