There was a lot of anticipation and curiosity about cryptocurrency and investments. As was expected, the government cautiously tried to include crypto, recognising this growing digital asset trend and making them taxable.
“There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30%,” said finance minister Nirmala Sitharaman presenting the Budget for fiscal year 2022-23 in parliament on Tuesday,
No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. “Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to 24 transfer of virtual digital asset at the rate of 1% of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient,” she added.
Sitharaman also proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23. “Introduction of Central Bank Digital Currency (CBDC) will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” she added.
Welcoming crypto tax provisions in the Union Budget, industry experts say it legitimises crypto transactions in some way and will help reduce speculative play especially in the cryptocurrency space.
Shravan Shetty, managing director, Primus Partners India says creation of a blockchain based central bank digital currency while bringing virtual digital assets under the tax net at the highest rate of 30% will help reduce speculative play especially in the cryptocurrency space. “The central currency will help bring the benefit of a digital currency to the economy in a structured framework,” he added.
Om Malviya, president, Tezos India, which builds and empowers a well-rounded Tezos Blockchain ecosystem in India, says while they welcome crypto tax provisions in this budget, legitimising crypto transactions in some way, however, it is disappointing to see that the government has decided that the income from the transfer of digital assets will be taxed at 30%. “This seems to be too high, given that the NFTs, cryptocurrencies and digital assets space is already booming and has immense potential for the economy in the near future. I am hopeful and certain that once the full potential of crypto is realised it will be lowered further,” he added.
Ajay Lakhotia, founder, social investment platform StockGro, says the government has taken the exemplary initiative to launch digital currencies, making India truly digital. “This will reduce the cost of physical currency management and build accountability and traceability. The much talked about 30% tax on income from digital assets ie. cryptocurrency resolves the sector's regulatory overhang to quite an extent through plugging tax leakage," he added.
“Given that the crypto and digital asset market in India is largely unorganised, we look forward to the launch of blockchain-based digital rupee by the RBI. The decision to tax cryptocurrency transfers at the receiver’s end may prove to be an advantage as far as transparency is concerned,” says Rachit Chawla, CEO and founder, Finway FSC.
Virtual currencies have exhibited wild swings, yet they have become extremely popular with a range of investors, particularly youngsters and teenagers. Many around the world turned millionaires and billionaires by betting on such assets, drawing in more investors looking to get rich quickly.
India attracted crypto investments worth $638 million across 48 funding rounds in 2021, according to data from industry tracker Tracxn.