The government proposed on Thursday to tighten the rules for taxing cryptocurrencies by prohibiting any losses from being offset against gains from other virtual digital assets.

The ministry intends to delete the word "other" from the clause relating to set off of losses from gains in virtual digital assets, according to revisions to the Finance Bill, 2022, distributed among Lok Sabha members. This means that a loss resulting from the transfer of virtual digital assets (VDA) cannot be offset against a gain resulting from the transfer of another VDA. A VDA could be a code, number, or token that can be transferred, saved, or sold electronically, according to the Finance Bill of 2022.

The VDAs will comprise popular cryptocurrencies as well as non-fungible tokens (NFTs), which have grown in popularity in recent years. The levy of income tax on crypto assets has been clarified in the 2022-23 Budget. From April 1, a 30% I-T, plus cess and surcharges, will be applied to such transactions in the same way that it is applied to horse racing winnings or other speculative transactions.

In addition, no deduction for any expenditure (other than the cost of purchase) or allowance will be permitted when calculating the revenue from the transfer of VDA.

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