Death and taxes are the only two certainties in life, I keep repeating the cliché.
Tax policies of governments are at times funny and neutral to some extent – they do not discriminate and mind taxing anything that is black / white, legal / illegal, real / imaginary, physical / virtual or otherwise. It’s just that the authorities need to smell some income and their concern thereafter is the ability to extract maximum from the taxpayers.
Governments all over the world keep finding newer ways to enhance their revenue by imposing taxes on any object that they can fathom as taxable – it does not matter if such thing is in physical, virtual or any other form – to the extent any such object brings economic value to tax-payers (in the eyes of the revenue, that is).
With the emergence of crypto currency and other form of digital assets off late which confers some monetary value to holders of such currency – Indian government has also started stipulating norms to impose taxes on benefits arising out of virtual digital assets (such as cryptocurrencies, non-fungible tokens (NFTs) and other forms of digital assets). This is despite no clear cut mandate on the legality or otherwise of such assets – RBI keeps warning general public about acquiring and transferring such assets from time to time but tax department isn’t bothered, they’d rather concentrate on detecting such transactions and collecting tax thereon.
To bring about some clarity on items that will be considered as virtual digital assets for taxation purposes – definition of virtual digital assets has been tweaked a bit to exclude certain items (i.e gift cards, vouchers, mileage points, reward points, and loyalty cards) from the ambit of such definition.
The underlying purpose of this exemption is to ensure tax payers will have the benefit of using gift card, vouchers, mileage points, reward points, loyalty cards, rebate or promotional programs to redeem such rewards or programs without attracting any tax liability in doing so.
In the last annual budget, central government has brought a new ruling imposing a tax of 30% on virtual digital assets and following this ruling government has received concerns from various stakeholders over too broad scope of definition of virtual digital assets.
Further 1% tax will be deducted as source on transactions in such asset classes above a certain threshold. Owners of virtual digital assets will be required to file Form 26QF with respect to such virtual digital assets.
It is a welcome measure by the central government for benefit of tax payers to exempt discount cards and programs offered to consumers as it is common for businesses to offer discounts or cashbacks to consumers via different cards or programs – If it is otherwise, it could impact consumers right to avail such benefits and could affect revenue of businesses as well.
Decision of central government not to extract tax from consumers from such discount programs is a decision that will benefit taxpayers and businesses alike.
