India in its Union Budget 2022-23 has decided to introduce a ‘Crypto Tax’. Finance Minister Nirmala Sitharaman proposed a 30% tax on any income from the transfer of virtual digital assets. No Tax deductions or exemptions apart from the cost of acquisition shall be permitted, according to Sitharaman.
With this decision, a lot of ambiguity around cryptocurrency has been addressed, ensuring better clarity on how exactly cryptocurrency will be taxed in India.
Cryptocurrency in India had gained tremendous popularity in the past few years, with over 10 crore reported cryptocurrency investors. The country also currently happens to be one of the biggest markets for digital tokens.
India’s stance on cryptocurrency has wavered quite a bit in the past. For a long time India’s government was unclear about the taxation scheme for cryptocurrency. However, investors now have a concrete taxation framework to refer to about the virtual asset investments.
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What Exactly Does This Proposed Crypto Tax Mean
“The proposed section 115BBH seeks to provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the income tax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30% and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset,” mentioned in the Union Budget memorandum.
There’s enough transparency now in terms of understanding how crypto trading would be taxed however, tax slabs on the transfer of cryptocurrency along with crypto assets recieved as gifts hasn’t been disclosed as of yet. India will also introduce 1% TDS on transactions which will primarily help the government to keep a close eye on these crypto transactions.
“The tax clarity is a welcome move. Overall, it’s a huge relief to see that our government is adopting the progressive stance of going ahead in the direction of innovation. By bringing in taxation, the government legitimises the industry to a large extent. The majority of people, especially corporates, who have been sitting on the sidelines because of uncertainties will now be able to participate in crypto. Overall, it’s a positive move for the industry,” said Nischal Shetty, founder and CEO, WazirX
While the 30% tax slab is quite high, it is still looked as a positive move by many in the industry itself. Twitter especially was outflowing with so many opinions, which mainly included that by taxing cryptocurrency, India in many ways was moving closer to adopting the digital asset.
India’s Plan to Launch a CBDC
Nirmala Sitharaman had also spoken of introducing a Central Bank Digital Currency along with taxing crypto. This aligns with the Centre’s plan to have their own fiat digital currency, to ensure that the use of private virtual coins as a legal tender doesn’t find its place in India.
India has now joined the likes of China and even Russia when it comes to pushing CBDCs. With newer technologies, the country strives to have their own digital currencies which would help make transactions easier and more seamless.
The overall move to tax cryptocurrency income at such a steep tax rate might have been a sigh of relief for crypto enthusiasts as this decision sways in the direction of finally finally and legally adopting crypto and not outrightly banning the same. However, this move could be quite detrimental for crypto traders which could also dampen the prospects of cryptocurrency in the nation.