As per the notification issued, Gift Vouchers, Gift Cards, Loyalty Cards, Mileage Points, Reward Points have been excluded from the definition of NFTs. Further, NFTs resulting in transfer of ownership of underlying tangible assets and transfer of ownership of such tangible assets are legally enforceable, are also excluded from the definition of NFTs.
As per the notification issued, ”
SO 2959(E).—In exercise of the powers conferred by clause (a) of the Explanation to clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the ‘Act’) The Central Government hereby specifies a token which qualifies as a non-fungible token as a virtual digital asset within the meaning of sub-clause (a) of clause (47A) of section 2 of the Act, but does not contain a non-fungible token. Convertible tokens whose transfer results in a transfer of ownership of the underlying tangible asset and the transfer of ownership of such underlying tangible asset is legally enforceable.,
In another notification issued further, ”
SO 2958(E).—In exercise of the powers conferred by the proviso to clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the following: virtual digital asset Which will be excluded from the definition of virtual digital asset:
(i) a gift card or voucher, being a record that can be used to obtain goods or services or to obtain a discount on goods or services;
(ii) Mileage Points, Reward Points or Loyalty Cards, is a record given without direct monetary consideration under a reward, reward, benefit, loyalty, incentive, discount or promotional program, used only to obtain goods or services Can be done or redeemed. discount on goods or services;
(iii) Subscription to websites or platforms or applications.,
Naveen Wadhwa, DGM, Chartered Accountant, Taxman.com, says, “Budget 2022 has announced that NFTs (which are notified by the government) will be taxed at a flat 30% rate at the same rate as other virtual digital assets (VDAs) and cryptos. However, there was confusion as to whether gift cards from retailers, mileage points from airlines constitute NFTs. Notifications issued by the CBDT on June 30, 2022 clarified that all NFTs would be classified as virtual digital assets, except of those who have been specifically excluded.”
“In general parlance, ‘fungible tokens’ (NFTs) are unique cryptographic tokens that exist on a blockchain and cannot be replicated. NFTs can represent real-world objects such as artwork and real estate. Notification No. 75 /2022 dated 30.06.2022, it is clarified that NFTs shall not include a non-fungible token, the transfer of which results in the transfer of ownership of the underlying tangible asset, the transfer of which is legally enforceable,” Akanksha Goyal, Direct Tax Partner, TR Chadha & Co LLP.
What happens if a painter makes an NFT of his painting? “If the sale of NFT of a painting transfers the ownership of the original painting to the buyer, such sale will not be taxed as transfer of NFT. It will be treated as sale of capital asset like land, gold etc. ” Wadhwa says.
Taxation of VDA, NFT and Crypto
Effective April 1, 2022, gains from virtual digital assets and NFTs (except those excluded) will be taxed at the same rate of 30%. Further, no deduction will be allowed in respect of expenditure (except the cost of acquisition). No set-off of loss arising out of purchase/sale of VDA from other income will be allowed. Even profit arising from one virtual digital asset will not be allowed to be set-off against loss arising from other virtual digital assets.
ahead, TDS The rate of 1% is levied on transfers of VDA,Crypto,NFT. TDS will be applicable when the amount payable by the buyer to the seller exceeds the specified limit.
What are NFTs?
NFTs are unique cryptographic tokens that are available on a blockchain. Unlike crypto, which are similar to each other, NFTs have unique identification codes that are different from each other. It is generally said that it is impossible for one NFT to be equal to another NFT. Generally, they represent real-world objects such as artwork, real estate, photographs, etc.