Non-Fungible Token
Also called: NFT · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
A Non-Fungible Token (NFT) is a unique token on a blockchain (a shared digital record) that certifies ownership of one specific item, digital or physical. "Fungible" means interchangeable: any Rs 100 note can be swapped for another. No two NFTs are the same, so one cannot be swapped for another like money. In India, NFTs are taxed as virtual digital assets (VDAs) under rules from Budget 2022-23:
- A 30% tax on gains from transfer, with no set-off of losses.
- 1% TDS (tax deducted at source) on transfers.
Example
A digital artist in Pune sells a piece of artwork as an NFT. The buyer's ownership is recorded on the blockchain. If the buyer later resells it at a profit, the gain is taxed at 30%.
Don't confuse with
- Cryptocurrency (such as Bitcoin): fungible, because one Bitcoin equals any other Bitcoin. Each NFT is unique.
- Copyright: owning an NFT proves you own that token. It does not by itself give you the copyright in the underlying work.