Cryptocurrency Tax News: India has finally introduced crypto tax regime! IN Budget 2022-22, the Government took a conservative stand on taxation by announcing flat 30% on income from digital virtual assets or crypto. In her Budget Speech 2022, Finance Minister Nirmala Sitharaman said that 30% tax would charged on income from transfer of virtual digital assets. She further said no set off will be allowed in case of losses. Also, gifts in virtual digital assets would be taxed in the hands of the recipient.
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The crypto industry and experts welcomed the 30% tax rule for digital assets income. Not just this, there was no negative impact on prices of most of the popular crypto tokens including Bitcoin, ETH, WRX, SOL, ADA, DOGE, MATIC listed on Indian exchanges.
Noting the phenomenal increase in transactions in “virtual digital assets”, Sithraman said the magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.
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“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 per cent,” the Finance Minister said. Sitharaman further said that no deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. The loss from transfer of virtual digital asset cannot be set off against any other income.
The Finance Minister also proposed to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset has also been proposed to be taxed in the hands of the recipient.
The Finance Minister also said that by 2023, a Blockchain-based and RBI-backed Central Bank Digital Currency (CBDC) will be introduced.
Commenting on the announcement, Sundara Rajan TK, Partner at DVS Advisors LLP, said: “The clarity on tax of digital assets is long over due and was expected to be provided this year. The announcement of tax @ 30% on digital asset, coupled with the government launching its own digital currency, is an indication that the government intends to discourage the same and would intend that only the HNIs make such investments and that the government shall not permit cryptos as currency.”
Ahead of the Budget, Cryptocurrency experts and investors were expecting clarity on taxation of gains from crypto assets in Budget 2022. Some experts believed that Finance Minister Nirmala Sitharaman may not touch upon the cryptocurrency issue directly in her Budget Speech 2022. However, some announcements related to crypto tax were expected to be made by the Finance Minister.
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According to Principal Principal Economic Adviser Sanjeev Sanyal, the Government was expected to take a balanced view on cryptocurrencies. Meanwhile, the Economic Survey 2022 tabled in the Parliament on Monday (January 31, 2021) did not talk about cryptocurrency or Blockchain. It is also highly unlikely that Cryptocurrency Regulation Bill will be introduced in the Parliament in the ongoing Budget Session.
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“As you know, this is a matter of some debate, both inside the government, in the Ministry of Finance, and even in Parliament. So, this is something that is currently in discussion…There are some financial stability issues. But there are also other arguments that are made in terms of innovation and so on….obviously a balanced view on this will be taken,” Sanyal was quoted as saying by PTI.
Read updates and analysis on cryptocurrency and crypto taxation from Budget 2022
Melbin Thomas, Co-founder, Sahicoin, says, “It is encouraging to see that the government has taken a positive step towards regulating digital assets. This will change a lot of misconceptions around crypto assets and pave the way forward to classifying them as a separate asset class. Government mandated 1% TDS for every trade will enable it to track crypto transactions and provide much needed visibility on the holders and users of crypto assets.”
Abhinav Soomaney, CEO of Cryptotax, says virtual currencies are to be taxed at a flat rate of 30%, that being said, any profits generated via the trade of cryptocurrencies would be taxed at 30%, including gifts and transfer of virtual assets from one wallet to another owned by different individuals.
“Investors trading with cryptocurrencies now need to report gains or losses which cannot be offset against any other sort of income. The government has set a fixed 30% rate to ensure all investors pay a percentage of their gains to the government in the form of taxes. Most commonly used cryptocurrency tax calculation methods include; highest in first out method, last in first out method, and highest in first out method. Out of the above mentioned tax calculation methods, the HIFO approach is most beneficial for investors who would like to use their highest cost basis coins and apply that towards coins sold. This would reduce the taxable gain amount significantly and give some relief to investors.”
L Badri Narayanan, Executive Partner, Lakshmikumaran & Sridharan Attorneys, says that virtual digital assets which includes NFTs and cryptocurrencies to be taxed at 30% on transfer of said assets. No deduction to be allowed except cost of acquisition. Loss from transfer of virtual digital asset cannot be set off”
“Taxation and recognition to crypto as an asset class for income tax doesn’t provide automotic recognition under law.
“The definition of a virtual digital asset is wide to cover emerging digital assets including NFT, assets in meta verse, digital currencies etc.. The wide definition and high tax rate and cost of tax compliance will create impetus in the growth.”
“However, the taxation rate introduced seems to be deterrent to the interest of the investors and lot similar to taxation gambling. Further, there is no allowable deduction apart from cost of acquisition. Losses cannot be carry forwarded as we currently have in security transactions. The entire scheme appears to remove ambiguity and at the same time discourage people from investing in these assets.”
The crypto ecosystem has welcomed Finance Minister Nirmala Sitharaman's proposal for a 30 per cent tax on digital assets for legitimising bets on the assets considered as very risky by the RBI, even as a law on regulating such activity is awaited. In her Budget Speech, Sitharaman has proposed the tax on income generated at the sale of any digital asset without any deductions, amid a growing proliferation of assets like Bitcoin even as the regulatory structure on them remains unclear. “India is finally on the path to legitimising the crypto sector in India,” Nischal Shetty, founder and chief executive of crypto exchange WazirX, said. Rishad Manekia, founder and MD of Kairos Capital, said the taxation along with the introduction of an Indian CBDC in 2022 gives a much clearer idea about the way forward for the blockchain ecosystem in India and how the government is thinking about this space. (PTI)
Abhishek Malhotra, Managing Partner, TMT Law Practice, says, “Cryptocurrency has been brought into the tax net of 30% which is a welcome move, as the same does not seem to be subject to a complete ban anymore. Further, as gains from its trading will also be taxed now, this will bring in some faith in the investors. The proposal to start digital rupee by 2022/ 2023, only indicates that the government is abreast of the changes taking place around the world and will take lead in granting approvals and investments. This also gives assurance to individuals that digital currencies will not be outlawed.”
“The government seems to be approaching the crypto space with a comprehensive understanding, while keeping in mind the P2P nature of crypto as they're considering taxing the transfer of digital assets. While we eagerly wait for the crypto bill, we expect positive and well-thought regulations going ahead, which are strongly needed for consumer protection.UPI and Aadhar are ground breaking, world renowned finance and governance initiatives. We hope for the same from Indian crypto regulations” – Mr. Roshan Aslam, Co-Founder & CEO at GoSats
“The taxation on profit generation from crypto investments is a welcome move as it legitimises the assets and its operations. We should be expecting a followup guidelines very soon on regulating the crypto assets operations from RBI and SEBI. The TDS on the transfer of assets is quite premature as there will be lot of confusion due to the complexity of the nature of various crypto assets, says Praveen Kumar, Founder and CEO of Belfrics Group.
“We are happy to note that the FM has announced 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 per cent — which 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,” says Om Malviya, President, Tezos India
Vishakha Singh, VP, WazirX NFT Marketplace, says, “It’s heartening to see that the government has acknowledged the potential for blockchain technology and digital assets, and is looking at formalising policies around them. It's a widely acknowledged fact that the crypto/NFT industry has also led to a boom in job opportunities and the government is now recognising the same. Their decision reflects the growing potential of NFTs as a digital asset in our country. We officially have a definition of digital assets, both fungible and non-fungible, on paper. We hope that this development leads to mainstream crypto/NFT adoption in India.”
Dhaval Kapadia, Director – Managed Portfolios, Morningstar Investment Advisers India, says “Any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent. 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 transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.”
He further says that virtual assets tax may have negative impact on trading volumes of Cryptos. Positive move to curb/control retail participation in the crypto segment.
“Today can be considered as an historic day for the Indian Digital journey. The much-awaited welcome by the Indian government to the use of Digital Currency and Crypto transactions will soon lead India to be one of the top economies of the world. Investing in and utilizing advanced technologies like blockchain is what helps the nation grow at par with the other countries globally. With $GARI Social Tokens listing on 19 global exchanges and Chingari transforming the Web3 universe for its creators, we are proud to be a part of the digital and crypto revolution,” says Sumit Ghosh, Co-founder & CEO, Chingari App.
“Currently the information and awareness about Crypto/ Digital Currency is very limited in India, which is also a major challenge that needs to be resolved,” he adds.
“This is a huge development. For the first time, a budget speech at the highest level has framed things in terms of “virtual digital assets” which can be regulated and taxed as a legitimate asset class in the future. The devil will be in the details but I see this as possibly a step 1 towards a regulatory framework which many of us have been advocating for since 2018 to ensure India plays a huge role in the development of Web3 – the new Internet,” says Nitin Sharma, Partner at Antler India and Global blockchain Lead at Antler.
“Until now, the debate was slightly misguided by assuming all digital assets were “private cryptocurrencies”, while most cryptos aren’t meant to be currencies. For me, it was still a positive surprise because the RBI continues to have serious opposition to non-sovereign digital assets, and only supports a government CBDC. At the same time, it was important to curtail rampant speculative retail activity and with the tax brackets and TDS, the government wants to disincentivise some of that,” he adds.
Toshendra Sharma, Founder and CEO of NFTically, says the Budget 2022 brings super positive news for the Web3.0 Startup ecosystem in India and brings a long term direction. Blockchain Innovations companies have exposure to Cryptocurrencies and this decision by the Government of India will help such core tech innovation to flourish without any fear. The Indian Government legitimatised crypto assets in India in an indirect way by coming out to tax the same. This is a strong step taken to boost a digital economy.”
“I firmly believe that the introduction of the digital rupee is a very progressive step and, this will ultimately drive growth in the digital economy. This will help to promote a cheaper currency management system, and faster lending and payments. Moreover, it is a clear indicator of a cashless economy that gives impetus to the government's focus on cashless payments. I am confident that Gen Z will take to the digital currency and tools in a massive way once it is launched,” says Shankar Nath, Co-Founder, Junio.
“The announcement to introduce Central bank digital currency (CBDC) by Nirmala Sitharaman, in Budget 2022 is an encouraging development. The remark is a testimony that the government is supportive of utilizing digital currency for larger masses. The adoption of CBDC will improve and make it easier for people to use Polytrade with the supporting infrastructure provided by the government. The development will make digital currencies more accessible to the people just as UPI made digital cash easier to use. We expect that in near future the government will continue to support and encourage digital currencies that will propel the GDP to $ 5 trillion as envisaged by our PM Narendra Modi,” says Piyush Gupta, CEO, Polytrade.
“The Finance Minister, Nirmala Sitharaman, has suggested 30% taxation on crypto gains. The losses if any cannot be offset against other income. Additionally, the introduction of TDS on crypto transfers can now monitor the crypto transactions. On sale of digital assets, 1% TDS would be applicable. Besides taxation on digital assets, India will soon have its blockchain power digital rupee. The digital asset classification will consist of crypto, NFT, and the government issued currencies. It is undoubtedly a progressive step towards boosting crypto adoption in the coming years,” says Edul Patel, CEO and Co-founder, Mudrex- A Global Crypto Investing Platform.
“The government has recognised the potential and increasing adoption of virtual digital assets. Today, the Finance Minister announced in the union budget 2022 that any income derived from the transfer of virtual assets will be taxed at 30%. This is the first step towards embracing the crypto and blockchain industries in India, we believe this is a positive move. With this move, the Indian government has also removed the uncertainty surrounding the crypto sector in India, by recognizing it as an asset class,” says Vikas Ahuja, CEO of CrossTower India.
“We also believe this will allow the government to better oversee crypto transactions. In addition, introducing a digital rupee utilizing blockchain technology represents a major advancement for the crypto sector, as it will accelerate crypto adoption and put India on the cutting edge of the digital revolution,” he added.
Keyur Patel, Co-Founder and Chairman of GuardianLink and BeyondLife.Club, says that virtual assets as lumped into one by Government implies crypto and NFTs all under same bucket.
For crypto, no deduction other than cost of acquisition to be allowed and no set off permitted against other income or losses, as well as Tax withholding to be triggered on sale at 1% beyond certain threshold. “This implies huge friction initially until the user base understands that all asset classes must be taxed for the holistic economic growth,” Patel said.
“Initially, it will create major roadblock for the investor community but like all eco systems, this too shall evolve,” he added.
Patel further said that NFTs are nascent in its classes and with such taxation will have to eventually adjust to grow the developing ecosystem. “Worldwide NFTs are still classified as non taxable assets, and it is imperative that the adjustment in understanding that Cryto Token is different than digital NFT is token is taken into consideration for future amendments and allow industries like Gaming, Interactive Immersive Museums and other edutainment NFT frameworks succeed without tax burden.”
“The Government has taken a conservative stance on the taxation of crypto assets. No long term capital gains tax treatment is available and a flat tax of 30% is levied on income arising from the transfer of crypto assets. No expenses other than cost of acquisition are tax deductible. Loss set off is severely limited. Gift of crypto assets is taxable in the hands of the recipient and TDS of 1% has introduced to track transactions in crypto assets,” says Gouri Puri, Partner, Shardul Amarchand Mangaldas.
“Government has brought in 30% tax on cryptos income, where no deduction for any expenses except cost of acquisition shall be allowed. Gift of virtual assets shall also be taxed for the recipient. This clears the air on taxes for cryptos, however, there are several types of incomes people earn from cryptos and hopefully more clarity will be available in the Budget documents,” says Archit Gupta, Founder and CEO, Clear
WazirX CEO Nischal Shetty says: “India is finally on the path to legitimising the crypto sector in India. It's a phenomenal news that India launching a blockchain powered Digital Rupee is a phenomenal news. This move will pave the way for crypto adoption and put India in the front seat of innovation.
It's also interesting to note how our government is beginning to recognise crypto as an emerging asset class given how our FM was referring to it as virtual digital asset. The biggest development today, however, was a clarity on crypto taxation. This will add the much needed recognition to the crypto ecosystem of India. We also hope to this development removes any ambiguity for banks, and they can provide financial services to the crypto industry.
Overall, it's a good news for us, and we will need to go through the detailed version of the budget to understand the finer details.”
Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, says:
“There is some clarity on the taxation digital currencies. Prima facie it seems digital currencies will be taxed akin to speculative income at 30% flat on a gross basis. Further the introduction of TDS on crypto-transfers will enable the government to better monitor crypto transactions.”
Saraswathi Kasturirangan, Partner, Deloitte India, says taxation of virtual digital assets would be 30%. No deduction other than cost of acquisition to be allowed. No set off permitted against other income. Tax withholding to be triggered on sale at 1% beyond certain threshold.
Cryptocurrency Tax: Profit from digital assets to be taxed at 30% and that too without setting off any expenses! Loss on digital assets not to be allowed to set off! Gift of digital assets also taxable. TDS of 1% on Digital assets! Finally, India's crypto taxation is here. Taxation at maximum rate would act as a disincentive for Cryptocurrencies as compared to other investment class /assets, says Maulik Doshi, Senior Executive Director-Direct Tax and Transfer Pricing Services at Nexdigm.
Ritesh Kumar, Partner, IndusLaw, says: “Including a specific tax regime for virtual digital asset (such as crypto) while provides clarity is not in lines with what the industry was expecting. The 30% rate of tax and restriction to set-off losses is a very bold move in discouraging transactions in crypto.”
Big tax on crypto income!
Finance Minister Nirmala Sitharaman says any income from transfer of any virtual digital asset to be taxed at the rate of 30%. Crypto/virtual digital asset gifts to be taxed in the hands of the recipient. No set off facility to available in case of losses from investment in these virtual assets.
Moin Ladha, Partner, Khaitan & Co
Introduction of Digital Rupee will have several benefits and will facilitate efficient transfer through government subsidy transfer programmes , and can accelerate promotion of financial inclusion in remote areas where it can be directly owned and transferred by end customers without needing intermediaries and complex kyc procedures.
Ritesh Kumar, Partner, IndusLaw
Introduction of central bank digital currency using block chain issued by RBI is a very big move. While there is silence on Crypto, one should wait to watch the manner and form in which the digital Rupee will be launched and its shadow impact on Crypto.
Cryptocurrency and Blockchain News Live: In Budget Speech 2022, Finance Minister Nirmala Sitharaman said that by 2023, Blockchain-based and RBI-backed Central Bank Digital Currency (CBDC) will be introduced in the country.
Finance Minister Nirmala Sitharaman has started her Budget Speech 2022.
According to Principal Economic Adviser Sanjeev Sanyal, Narendra Modi government will take a balanced view on cryptocurrencies. Read Full Story
Cryptocurrency News Live: Most of the cryptocurrency industry and tax experts are expecting that Budget 2022 will introduce rules for taxation of cryptocurrency income, they are not sure whether Finance Minister Nirmala Sitharaman will touch upon this issue in her Budget speech, according to over 20 experts who participated in a pre-budget survey by FE Online. Read Full Report Here