Finance Minister Nirmala Sitharaman has unveiled the Indian Budget today for 2022-23 with two major announcements around cryptocurrencies.
#BudgetWithMint | "Any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent" – Finance Minister #NirmalaSitharaman presents #Budget2022 in parliament pic.twitter.com/hiTwADhd8e
— Mint (@livemint) February 1, 2022
The FM has proposed a taxation rate of 30% on any income arising from the transfer of any virtual digital asset. Moreover, it is reported that no deduction in respect of any expenditure or allowance will be allowed while computing such income. An exception will only be made by including the cost of acquisition.
Another major announcement comes around a central bank digital currency or CBDC. FM Sitharaman said in her budget speech
that a digital rupee will be issued using blockchain and related technologies. This can become a reality in 2022-23 when it will be issued by the Reserve Bank of India. FM said,
“This will give a big boost to the economy.”
— All India Radio News (@airnewsalerts) February 1, 2022
Overall, the industry has given a positive reaction to the above announcements. Nischal Shetty, chief of WazirX took to Twitter to call it “great news.”
Blockchain powered Digital Rupee by @RBI will be introduced 2022-23 in India
Great news! More crypto adoption on the way 🚀
Glad to know that RBI will now start getting deeper into crypto. Hope to see banks start getting involved with crypto industry as well#IndiaWantsCrypto
— Nischal (WazirX) ⚡️ (@NischalShetty) February 1, 2022
Further, the government has specified that any loss from the transfer of virtual digital assets cannot be set off against any other income.
And in order to capture the transaction details, FM Sitharaman has also proposed TDS or Tax Deducted at Source on payment made in relation to transfer of virtual digital asset at the rate of 1%, above a monetary threshold. Gifting crypto is also no longer tax-free. FM stated,
“Gift a virtual digital asset is also proposed to be taxed in the hands of the recipient.”
Additionally, FM acknowledged that there has been a phenomenal increase in a transaction in virtual digital assets. And therefore, the “magnitude and frequency of these transactions” called for a taxation regime.
Sidharth Sogani, Founder & CEO, CREBACO told AMBCrypto this is a good budget with respect to crypto. While he studies the finance fineprint, his first impression is that taxation is a good move as “you can’t tax anything which is illegal.” Having said that, he added,
“There are several gaps which need to be addressed.”
He pointed out that indirect tax issues haven’t been addressed in the budget and the industry will need more clarity around that. Additionally, he took to Twitter to explain that disallowing set-offs or expenditure “is going to be terrible for miners.”
“This will discourage the industrial aspect of the ecosystem.”
However, Naimish Sanghvi, CEO of Coin Crunch India, doesn’t think that the CBDC launch is “good news.”
Launch of CBDC is not good news. #BudgetSession2022
Reason: The essay suggesting CBDC earlier established that the use of CBDC will reduce the use of Bitcoin and other crypto. It makes ZERO sense!
— Naimish Sanghvi (@ThatNaimish) February 1, 2022
This is a developing story. As details emerge, it will be updated