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India

Breaking | India: Transfer of digital assets to attract 30% tax

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Finance Minister Nirmala Sitharaman has unveiled the Indian Budget today for 2022-23 with two major announcements around cryptocurrencies.

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.”

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.”

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.”

This is a developing story. As details emerge, it will be updated

 

 

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Shraddha is a full-time journalist at AMBCrypto. She has a keen interest in personal finance and wealth generation. Her primary focus is on the cryptocurrency space's applications for investment vehicles and portfolios
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