Cryptocurrency taxation
Cryptocurrency taxation in India is now finally introduced. The government has taken a stable step towards crypto taxation and digital assets by releasing 30% of such income. Finance Minister Nirmala Sitharaman introduced her budget 2022 and said that 30% tax will be charged on the income transferring of any virtual and digital assets. She also stated that no allowance will be permitted in the event of any losses. Gifts of virtual digital assets will also be taxed in the recipient's hands.
According to Finance Minister Nirmala Sitharaman, the scale and speed of these transactions necessitate the establishment of a special tax regime, by considering the remarkable growth in the transaction of virtual digital assets. She said in her budget 2022 that “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 percent.”
TDS on payment transfers in budget 2022
The Finance Minister also suggested charging TDS on payments made in connection with the transfer of virtual digital assets at a rate of 1% of such payment above a monetary threshold. It has also been recommended that gifts of virtual digital assets be taxed in the recipient's hands. Sitharaman further mentioned that, Except for the cost of purchase, no credit in regard of any expense or allowance shall be permitted for computing such income. The loss incurred as a result of the transfer of a virtual digital asset can indeed be offset against any other revenue.
RBI will be introduced Central Bank Digital Currency after Cryptocurrency taxation
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The Finance Minister further stated that a Blockchain-based, RBI-backed Central Bank Digital Currency (CBDC) will be implemented by 2023. She said on Tuesday that the Reserve Bank of India (RBI) will issue a digital rupee utilizing blockchain and other technologies beginning in 2022-23.
In her budget speech, she clearly said that “Introduction of Central Bank Digital Currency (CBDC) will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system”.
The RBI has been focusing on a gradual implementation of CBDC after carefully evaluating its impact on a variety of concerns, including how it may impair banks' ability to mobilize deposits and its possible influence on monetary policy conduct.
Sundara Rajan TK, Partner at DVS Advisors LLP, commented on the announcement: “The clarity on the tax of digital assets is long overdue and was expected to be provided this year. The announcement of tax @ 30% on the digital asset, coupled with the government launching its 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 crypto as currency.”
Cryptocurrency specialists and investors were hoping for clarification on taxes.
Cryptocurrency professionals and investors were anticipating clarification on the taxation of profits from digital currencies in Budget 2022. Some analysts predict that Finance Minister Nirmala Sitharaman would avoid openly addressing the cryptocurrency problem in her Budget Speech 2022. However, the Finance Minister was anticipated to make some crypto tax news. She finally introduced Cryptocurrency taxation in India that stated 30% tax will be charged on the income transferring of any virtual and digital assets.
