Read the following passage and answer the question.

GOI has reaffirmed its intent in amendments to the Finance Bill to use tax as a deterrent to speculation in virtual digital assets. The amendments disallow losses on the sale of one crypto asset to be set off against gains or another. No deduction is permitted for any expenditure other than the cost of acquisition for computation of income from sale of crypto and non-fungible tokens (NFTs). Every transfer of crypto assets will be taxed at the proposed 30% rate, irrespective of whether they are a capital asset or not. Only the proposed 1% rate of tax deducted at source will apply to transactions in digital assets. Penalties have been imposed for taxpayers who have claimed a deduction of surcharge and cess from their taxable income, but have not on their own accord, paid the tax and interest on deduction they have claimed.

the The inability to set off losses will skew the risk- reward profile of digital assets and crypto exchanges fear it could push trading activity beyond Indian jurisdiction to decentralized exchanges and foreign platforms accessed through virtual private networks. The industry feels not allowing tax deduction on the cost of mining cryptos will eventually force blockchain companies and the talent they hire to operate outside the country. To the extent that the proposed tax regime drives users from exchangers compliant with know your customer (KYC) rules towards underground peer-to-peer platforms, deterrence would be diluted. Nirmala Sitharaman in her statement while moving the amendments has clarified the tax on private digital assets does not indicate Gol's stance on their legitimacy. The regulatory position could become clearer once the Reserve Bank of India (RBI) is ready with its digital currency. Fiat digital currencies, which make transactions and monetary transmission more efficient, are inevitable as the use of cash plateaus in several countries. Speculation, and a reflex to curb it, must not draw attention away from the inherent superiority of digital currencies. This is the future of money.


1. Digital currency regulations will result into which one of the following?

(a) Scare digital currencies away

(b) Permit deduction of any expenditure other than the cost of acquisition for computation

(c) Impose penalties for tax payers who have claimed a deduction of surcharge and cess from their taxable income.

(d) Attract 30% tax on every transfer of crypto asset


2. Given below are two statements:

Statement I: Non-fungible tokens cannot be splitted.

Statement II: Non-fungible tokens can be replicated at convenience.

In the light of the above statements

choose the correct answer from the options given below:

(a) Both Statement I and Statement II are true

(b) Both Statement I and Statement II are false

(c) Statement I is true and Statement II is false

(d) Statement I is false and Statement II is true


3. Government of India's intent towards virtual digital assets is which one of the following?

(a) To promote speculation

(b) To be silent on speculation

(c) To discourage speculation

(d) To stop speculation


4. Given below are two statements: One is labelled as Assertion A and the other is labelled as Reason R

Assertion (A): Crypto exchanges fear that the new amendments could push trading activity beyond Indian jurisdiction to decentralized exchanges.

Reason (R): The new amendments disallow losses on the sale of new crypto asset to be set off against gains on another.

In the light of the above statements, choose the most appropriate answer from the options given below:

(a) Both (A) and (R) are correct and (R) is the correct explanation of (A)

(b) Both (A) and (R) are correct and (R) is not the correct explanation of  (A)

(c) (A) is correct but (R) is not correct

(d) (A) is not correct but (R) is correct


5. Which one of the following is done by the Digital Currency Regulatory Framework?

(a) Eventually force blockchain companies to operate from outside

(b) Attract users towards exchanges which are compliant with know your customer rules

(c) Motivate the operators to operate outside the country

(d) Promote underground peer to peer crypto platforms


ANSWERS

1 - d

2 - c 

3 - c

4 - a

5 - b