Budget 2022: Income from digital assets to invite 30% tax
The FM also said in her Budget speech that the tax incentive scheme for startups will be extended by one more year to 2023
Finance Minister Nirmala Sitharaman has announced that a scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G. She also stated that the tax incentive scheme for startups will be extended by one more year to 2023.
Sitharaman said that the 5G spectrum auctions will be conducted in 2022 to facilitate rollout of 5G mobile services within 2022-23 by private telecom providers. She added that a scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G as part of the Production Linked Incentive Scheme.
"To enable affordable broadband and mobile service proliferation in rural and remote areas, five per cent of annual collections under the Universal Service Obligation Fund will be allocated. This will promote R&D and commercialization of technologies and solutions," the FM said in her budget speech.
Sitharaman said that the government's vision is that all villages and their residents should have the same access to e-services, communication facilities, and digital resources as urban areas and their residents. Accordingly, the contracts for laying optical fibre in all villages, including remote areas, will be awarded under the Bharatnet project through PPP in 2022-23. "Completion is expected in 2025. Measures will be taken to enable better and more efficient use of the optical fibre."
Incentives for Start-ups
The FM pointed out that start-ups have emerged as drivers of growth for the economy and the country has seen a manifold increase in successful start-ups. The government had provided a tax incentive for three consecutive years out of ten years from incorporation to eligible start-ups established before 31.3.2022. "In view of the Covid pandemic, I propose to extend the period of incorporation of the eligible start-up by one more year, that is, up to 31.03.2023 for providing such tax incentive," the FM said.
Sunrise Opportunities
The FM noted that Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems have immense potential to assist sustainable development at scale and modernize the country.
"Supportive policies, light-touch regulations, facilitative actions to build domestic capacities, and promotion of research & development will guide the government’s approach. For R&D in these sunrise opportunities, in addition to efforts of collaboration among academia, industry and public institutions, government contribution will be provided," she added.
Scheme for taxation of virtual digital assets
While stating that there has been a phenomenal increase in transactions in virtual digital assets, the FM announced the introduction of 30% tax on income generated from transfer of any virtual digital asset.
"The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent," she said.
The FM also said that deduction in respect of any expenditure or allowance will not be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income, she added.
"Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient," she informed.
Commenting on the Budget, Punit Goenka, MD & CEO, Zee Entertainment Enterprises Ltd., said, “The holistic focus on broad-based economic recovery in the Union Budget, with a huge emphasis on job creation and digital ecosystem of the country, is a positive for India Inc. at large.”
“The steps announced to build domestic capacity for animation, visual-effects, gaming and comics segment will certainly help enhance capabilities, enabling the country to compete more effectively at a global stage. An extension in the credit line guarantee scheme is also a welcome move, which will provide some much-needed relief to the relevant sectors which were impacted due to the pandemic,” he said.
