Union Finance Minister Nirmala Sitharaman on Tuesday cleared doubts and removed uncertainty over the future of cryptocurrency in India when she announced in her Budget speech that the Reserve Bank of India (RBI) will launch its digital currency in the year starting April 1.
The income from the transfer of all virtual assets will also be taxed at 30%. This has saved lakhs of crypto investors who were apprehensive about the future of digital currency in India.
India will now join a handful of nations to launch its own blockchain currency. This has huge implications for finance overall and underscores India’s pre-eminence in digitised finance. Not even the United States has launched their CBC yet.
Immediately, the CBC means leveraging the benefits of blockchain, lower opex, and faster settlements. We need to wait for full details to understand all implications.
However, the taxation of virtual assets is now clearly defined. So, we now at least know what tax filers can expect this year. Individuals might have wanted lower LTCG taxes and carry forward of losses similar to equity or housing. But this is at least a start.
The union government was keen to bring to the crypto under the tax ambit as many stakeholders including investors and industry players were expecting the introduction of a tax policy framework in the Union Budget 2022.
With the tax rate of 30 per cent, similar to gains from lottery and gambling winnings, crypto is officially recognised and investors will be paying taxes on the income arising from the sale of the digital assets.
Till now there is no law regulating virtual currencies. Despite uncertainty till now millions of Indians have already invested lakhs of rupees in the digital currency.
In India, there has been a phenomenal increase in transactions in virtual digital assets. That is why the government made a specific tax regime.
The Finance Minister explained:
1) 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.
2) The govt proposed to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1% of such consideration above a monetary threshold.
3) Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
The central government is also launching a digital rupee to make the transactions more efficient, and the Reserve Bank of India will implement it to reduce the people’s dependency on cash. India is now a step closer to become one of the few countries who have made regulations related to the digital currency and adopt blockchain technology and integrate it with the economy.
(The author is CEO, Bankbazaar.com)