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NEW DELHI : Investors would not be allowed to set off loss in one crypto asset against another, the government said on Monday. Mining infrastructure would also not be eligible to be deducted as the cost of acquisition, it said.

This is a significant blow to people who invest in crypto as taxation provisions such as setting off losses and the cost of acquisition in other asset classes such as stocks, mutual funds, or gold help investors lower tax incidence.

Union finance Minister Nirmala Sitharaman had on 1 February introduced a 30% tax on any income from the transfer of virtual digital assets (VDA) or crypto assets. The tax proposal covered all emerging digital assets, such as non-fungible tokens (NFTs), assets in metaverse, digital currencies and tokens. Along with the 30% tax, the Union budget 2022-23 also proposed a 1% deduction of tax at source on transfer of such assets.

Opinions of tax experts were split on whether investors could set off losses in one crypto against another crypto asset.

“According to the provisions of the proposed section 115BBH to the Income-tax Act, 1961, loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA," minister of state for finance Pankaj Chaudhary said in the Lok Sabha on Monday, in response to queries raised by Lok Sabha member Karti Chidambaram on the status crypto currency in India.

“The major issue in crypto taxes is the inability to offset losses even in different crypto trades. Implementing a single tax for single crypto rule will be a massive blow to the nascent crypto industry in India," said Shivam Thakral, chief executive officer of BuyUcoin.

Chaudhary also clarified that infrastructure costs incurred in mining of crypto assets will not be treated as cost of acquisition as this will be in the nature of capital expenditure.

Excluding the mining cost from the acquisition cost will also discourage investors from investing in crypto assets with a high maker fee, Thakral said.

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