India’s Finance Minister Nirmala Sitharaman announced to impose a 30% tax on cryptocurrency. Partner at IndusLaw, Ritesh Kumar, told Business Insider, “The 30% rate of tax and restriction to set-off losses is a very bold move in discouraging transactions in crypto.”
Nirmala Sitharaman, Finance Minister of India, said during the Union Budget 2022-23, “Cryptocurrencies will be taxed at 30%. Any Income from the transfer of any virtual digital asset shall be taxed at 30%. No deductions and exemptions allowed. Loss from transfer of such assets cannot be set off against any other income.”
Cryptocurrencies to be imposed with 30% tax
Individuals with more than ₹15 lakh p.a. fall under the highest tax bracket applicable. Previously, crypto transactions were categorized under ‘business income’ or ‘capital income,’ as per income tax rules.
Non-fungible tokens and cryptocurrencies will face a 30% tax. While the legalities of cryptocurrencies are still undecided.
Furthermore, as there is no official data on the size of the Indian crypto market, the industry has estimated nearly 15-20 million crypto investors in India.
However, India’s central bank has raised concerns about private cryptocurrency. They worry cryptocurrency can cause financial instability. These “serious concerns” have caused several banks to cut ties with crypto firms.
Nevertheless, the finance minister also announced that the central bank will introduce digital currency next year. The digital currency will use various supporting technology and blockchain.
Nirmala Sitharaman also said, “The introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system.”
What do industry experts say about the 30% tax imposed on cryptocurrencies?
India’s most prominent crypto exchange CEO and co-founder Sumit Gupta tweeted, “Taxation of Virtual Digital Assets or #crypto is a step in the right direction. It gives a lot of clarity. India’s focus on digital innovation and promotion of blockchain is welcome. The details need to be studied to comment further. But it’s great news for crypto investors in India.”
WazirX, a Binance-owned Indian exchange, reported a yearly trading volume that exceeded $43 billion in 2021.
The growth exceeded at “1,735%” from 2020, despite the Indian central bank pushing to ban cryptocurrency tradings.
Vikram Subburaj Giottus Crypto Exchange CEO said, “It gives relief to a lot of investors that the government is recognizing the crypto-asset ecosystem and has taken efforts to give clarity on its taxation. This legitimizes the crypto asset in the country and paves way for a formal umbrella of regulations going forward.”
Clarity on the tax on digital assets
Sundara Rajan TK, Partner at DVS Advisors LLP, commented on the tax announcement, “The clarity on tax of digital assets is long overdue and was expected to be provided this year. The announcement of tax at 30% on digital assets, 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.”
Despite the announcement that India will impose a 30% tax on all digital assets, various cryptocurrency experts await clarity.
Experts also believe that the finance minister may not address the cryptocurrency issues directly in the Budget Speech 2022.